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Incorporation Offers Personal Liability Protection

You might be wondering, “Why should I incorporate my business?” Even if you already own a business, it’s never too late to incorporate and reap the potential benefits. Many companies start out as a sole proprietorship or partnership and then formally incorporate later on. It doesn’t have to be an all-in-one deal when you start a business. You can change your business status as it grows, thus, giving you ample time to reach certain goals, build customer trust and observe how well the business will fare profit-wise.

The benefits can be numerous, depending on the type of business. Incorporation offers personal liability protection, which protects your personal assets in the event of a lawsuit against your company or other financial obligations that may arise from the business. There are also tax benefits, but these are dependent upon the amount of income and tax rates. Only an accountant can determine if incorporating will be truly beneficial for your taxes. Incorporation also gives your company a “corporate identity” in the eye of the public as well as potential business associates. You’ll be able to raise capital for expansion through the offering of stock in your company. Your company can also continue on after you’re retired or deceased (time limited with LLCs).

There are just a few disadvantages, such as the paperwork and records that must be kept on a continual basis for tax purposes, the cost of incorporation start-up and maintenance, and liability issues with credit agreements and/or personal guarantees.

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