What are the benefits of incorporating a small business? Why should i incorporate a business? Well, i advice you read on to find out.
Incorporating a business is a must in the business atmosphere of today. Such an action has plenty of implications beyond business; psychological, legal, and even financial. Aside from seeing the glowering “Inc.” that renders a high sense of formality at the end of your business name, there are plenty of benefits that incorporation yields.
A sole proprietorship may work for you right now, but as the business landscape evolves, incorporating a business is something that you may have to consider.
6 Undisputed Benefits of Incorporating a Small Business
1. It makes your business more legitimate in the eyes of the public
The “Inc.” at the end of your business name that you get upon incorporation is not mere decoration; people looking for services actually give plenty of regard for that abbreviation because it signifies the assertiveness of a business. Incorporation reminds your customers that they are dealing with a solid business, not a mere ramshackle operation.
Businesses should do well to remind their customers that they are trustworthy, dedicated and committed to serving the customer’s interests through incorporation. Incorporation makes your business as a whole, more accountable to the customers.
2. It makes your business legally protected
Incorporation makes your business liable for all the mistakes it makes that may result to legal proceedings; not you, the business owner. It is possible for your business to tumble down in the rugged, competitive economic scene of today and the moment your business owes money, make sure your business is already incorporated; so that no one will come after your personal or family property.
Also, incorporation shifts legal responsibility from you; the owner to the business itself. If you own a business, you and your family won’t have to worry over lawsuits because no one will take it against you and your family, but against your business itself.
3. It grants financial incentives to your business
Incorporating a business can reduce the taxes your business has to pay. It can also reduce insurance premiums (up to 100%) for your business, such as health insurance, travel insurance and life insurance. Your business can also carry over income deficits to balance future profits.
Money is important in the business settings of today; the money you don’t lose is just as valuable as the money you gain. That counts taxes. The taxes you don’t have to pay can count as profit. Incorporating a business is one way to reduce taxes.
An incorporated business generally has lower tax rates than an unincorporated business. The owners of an incorporated business can also subtract ordinary business expenses, like operating expenses and salaries; before they compute the business’s income, which is taxed. Incorporation can also greatly reduce insurance premiums.
(In some cases, there is double taxation – first, the business is taxed for its income, then each shareholder is taxed separately. This may lead to a higher tax payment than in an unincorporated business. There are other reasons to incorporate a business and if you determine that you may pay higher taxes upon incorporation, then you may have to count other benefits, mainly limited liability).
4. It allows you to sell shares of your business
Shares are certificates of ownership of a business. Selling shares of stock to interested individuals can raise funds for the business to use as capital for expansion, or just to stay afloat long enough for them to make substantial profits. The money obtained by selling shares is not counted as debt, so your business is relieved of the financial burden that it may have to carry over while operating, if it were in debt.
5. It allows you to transfer control of your business to another person easily
An incorporated business, which is now a distinct entity, can be sold to someone else or can be given to a family member or a relative. Also, when you retire or pass away, the incorporated business will still exist.
6. It helps you separate your assets and liabilities
Incorporation can help you separate business investments from personal investments. In a sole proprietorship, you may blend your business investments with personal investments, so they overlap. But in a corporation, what is for the business is solely for the business and what is personal is solely personal. The separation of business finances and personal finances that comes with incorporating a business can help you and your business in many conceivable ways.
In a sole proprietorship, what affects your business financially will affect your personal finances as well. If you obtain a business debt, creditors are allowed to take your personal investments such as cars, house; as debt payments. Also, if you have a personal debt and you have to file for bankruptcy, creditors may come after your business assets. Either way, once a single problem comes, you get an additional problem.
That causes a stressful situation for you and your family. Incorporation frees you from both dangers through what we call limited liability. Once an incorporated business goes bankrupt, your creditors will not be able to come after your personal credits and once you go bankrupt; your creditors will not be able to come after your business assets.
Either way, you and your business are safe; and you get a chance to lift your finances back to normal. You can save a business dying down through your personal assets, and you can save yourself from bankruptcy through yielding more profits in business.
There are plenty of companies, offline or online, that offer incorporation services, so now that you know the benefits of incorporating a business, find an incorporation service now that fits your business requirements and feel the power of the “Inc.” after your business name.
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