"To incorporate or not incorporate?" That is your question.
Consider both the pros and the con when deciding
whether incorporating your business is the best choice for you.
You're on the threshold of starting a new business, and you have a lot on your mind.
Thoughts of business plans, loans, marketing, cash flow and other start-up issues boggle your mind.
And you in the midst of all of this decision-making, it is imperative that you decide on which type of business entity will fit your needs.
Do you know, for example, that each business entity has different implications when it comes to taxes, liabilities, and passing on your business to future successors?
One of the biggest advantages of incorporating your business is that it gives you a statutory name protection - something that sole proprietorships and partnerships do not offer.
Incorporating your business adds sheen, respectability and luster to your business. Thus, if you decide that incorporating your business works for you, then you will need to
Incorporating your business protects it by limiting its liability to the extent of its equity capital.
The new saying is: Incorporate or perish! People pass away, corporations don't - unless you finish them off (by winding them up).
3. Tax benefits.
One of the huge advantages of incorporating your business is the tax angle.
You can run a corporation on an "accrual accounting" basis - which means that you can recognize income and expense when they accrue, not when they are received or paid actually.
Apart from this, a corporation is also entitled to tax deferral benefits, which means that you can postpone paying your taxes to a later date.
Plus, if your newly incorporated company is a small business, then you may fall in a lower tax bracket, as compared to a tax bracket that's applicable for an individual.
4. Name protection.
Incorporating your business gives you statutory name protection.
This means that if you have coined an original, spicy name, for your company, such as Apple or Microsoft, incorporation will help ensure that it is not stolen.
5. Raising money.
6. Wealth generation.
Assuming your business is a success story, you can even list your shares on the stock market when you grow big.
Some Of The Disadvantages Of Incorporating Your Business
As with anything else, there are disadvantages of incorporating your business:
This means that if your company is running into losses, the red ink remains in the Balance Sheet until the company starts making up for these losses.
Not only will you have the initial incorporation expense,
But you will also have to face recurring expenses such as audit and tax fees, which add to the overall overheads.
True, some of the disadvantages may appear like barbed wires at first, but once you get into the groove of business, you will get past them.
Ask Bill Gates or Steve Jobs, and they will agree.
Jokes aside, once you walk through the process of incorporating your business, you must adhere to the norms and follow the laws.
Incorporating Your Business Doesn't Have To Be Difficult.
If you need a little help, you can contact your local Small Business Development Center.
Also, there are companies that are dedicated to making the incorporation process quick, painless and easy for you
Wishing you a successfully sustainable and profitable business,
Signed: Latarsha Lytle, MBA, your business strategy advisor and motivational coach
Deciding Whether Incorporating Your Business Is For You Is Only The Beginning. Read More Strategic Tips On What You Need To Start a Successfully Profitable Business.
Incorporating your business adds sheen, respectability and luster to your business.
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