Are you just starting your small business?
Every year, over 627,000 new businesses open. While opening a new business can be very exciting, there are a lot of logistics to keep in mind.
For example, whether or not you want to incorporate your business.
With all the work that comes into starting a small business, it may seem that incorporating your business is just one extra hassle on the to-do list.
But, there are a lot of benefits that come with small business incorporation.
What are the benefits of incorporating a business?
Check out this guide to learn the top benefits of incorporating your business.
1. Protection of Your Personal Assets
Perhaps the biggest advantage of incorporating your small business is that it helps to protect your assets.
When you incorporate your business, your business becomes responsible for its own debts. While this may sound like a negative at first, it actually means that creditors can only seek payments from the assets that belong to the corporation, and not any personal assets of directors, officers, or shareholders.
In other words, you'll be able to conduct business without putting your family's home, vehicles, or other assets on the line.
2. Enhance the Credibility of Your Business
Gaining credibility as a business owner, especially a new business owner, can be incredibly tough.
In fact, people's trust in business has declined over the years. According to a recent survey in which 28 different countries were surveyed, less than 50 percent of people do what is right. And, 63 percent believe that CEOS only do what's right some of the time or not at all.
While these numbers may sound troubling, the truth is, there is a lot you can do to make your business more trustworthy and credible to the general public.
And one of the best ways to do that is by incorporating your business. Even though the average person may not know what exactly business incorporation entails, they do know that it in someway legitimizes your business.
And, suppliers and other business associates will also see your business as being more credible once it's incorporated.
The simple three letters of "inc." after your name help to convey stability, credibility, and permanence to the outside world.
3. Prepare for Retirement
If you're just starting your business, retirement is probably one of the last things n your mind.
But, it shouldn't be. Statistics show that nearly half of American families have n retirement savings at all.
Truthfully, it's never too early to start thinking about your retirement.
Luckily, incorporating your business is one of the best ways to set yourself up for retirement. By incorporating your business, it's much easier to establish retirement funds, 401Ks, and other qualified plans.
4. Easier Access to Capital
Because a corporation can issue shares of stock, it makes it much easier for them to raise capital.
Which, in turn, will make it easier for your business to grow and develop.
Also, if you're in the market for a loan from the bank, that's another great reason to incorporate your business. In most instances, banks would much rather give a loan to an incorporated business instead of an unincorporated one.
And, in general, corporations tend to have greater access to alternative sources for capital, which can be used to help pay off business debts.
5. Tax Flexibility
Many people see taxes as one of the biggest downsides to incorporating a business.
After all, corporations are subject to double taxation of corporate profits once income is distributed. However, this can be avoided by selecting an S corporation over a C corporation.
But, it's also important to note that there's a lot of tax flexibility that comes with incorporating your business.
For example, there are a lot of tax breaks. Once your business is incorporated, you can write off such things as health insurance premiums, life insurance, and self-employment taxes.
6. Anonymity
For whatever reason, you may want to open your business or be a part of the opening of a business without it being public knowledge.
If this is the case, the only way to ensure anonymity is to incorporate your business.
7. Name Protection
If you want the name of your business to be protected, the best thing to do is to get it incorporated.
Not only does name protection help you to avoid any future legal disputes, but it also can help with branding and marketing.
Once your name is protected, there's no way any other business can use the exact same name. This means you'll never have to worry about your customers confusing you with any other businesses out there.
8. Perpetual Existence
Like most business owners, you probably hope that your business withstands the test of time.
The good thing is, that by incorporating your business, you help to ensure just that.
Incorporating your business guarantees that your business can live on even if there are changes in management, ownership, shareholders, or individual directors.
This will also help you to avoid any legal entanglements that often come with changes in the structure of a business.
Business Incorporation: Time to Get Started
As you can see, there are many benefits to incorporating your business, and it's definitely worth the extra hassle in paperwork and time.
That being said, incorporating your business does mean you will have to deal with ongoing fees and more record-keeping. Therefore, it's very important that you are very serious about your business and you believe in its success before you go forward with incorporating it.
