6 Reasons to Incorporate your Business

Corporations are a quite popular business structure, and for good reasons. They give you security, flexibility, and credibility. If you’re wondering whether you should be incorporating your business or not, you’ve come to the right place. Let me give you 6 reasons that make corporations a solid choice.

1. Liability Protection
Everybody who’s anybody knows that running a business comes with risks. While we all hope that our business will prosper and we won’t have to deal with liabilities, it's always a good idea to put some precautions in place.

Incorporating your business gives it a separate legal identity. This legally separates you from your business thereby exonerating you from liabilities related to your business. In other words, even if things don’t go as planned, you’ll still have your personal assets and savings … creditors won’t be able to go after them.

2. Tax BenefitsGuess what?
The tax rates for corporations are also lower than individual tax rates. Nice, right?

Corporations also offer additional tax deductions and benefits that are not available to partnerships or sole proprietorships:

  • For Corporations, losses are fully tax deductible.
  • Medical insurance for the families of corporation employees is fully tax deductible.
  • Under a Corporation, self-employment and other similar taxes will only be applicable to the salaries earned by the employees of the corporation. These taxes will not be applied to the profits of the corporation, thereby giving you a potential savings of thousands of dollars each year.
  • The profits of a Corporation can be retained to facilitate further expansion of the business. By doing so, a corporation can have additional tax advantages.
3. Raise Capital by Issuing Stock
Once you’ve incorporated your business you’re able to raise capital by selling shares of your business in the stock market.  Moreover, you can also use shares to reward loyal employees, vendors or contractors. Not too shabby, eh?

Investors are also more inclined to invest in corporations vs other business structures, due to the flexibility of acquiring different classes of stock.

4. Credibility
Incorporating your business will boost your credibility for customers and partners alike. Companies are more comfortable doing business with corporations as opposed to sole proprietorships or partnerships.

5. Effective Management
A corporation does not have a single owner, instead it is run by the collective decisions of the board of directors. The board of directors vote on all important affairs of the business; decisions are based on mutual consent. This eliminates misunderstandings and arguments that may arise in partnerships between different founding partners.

6. Perpetual Existence
“Perpetual Existence” means that your corporation has a life of its own separate from its owners.

Unlike sole proprietorships or partnerships, a corporation can live beyond the life of its owners. I know, I know, you don’t want to think about your eventual demise, but it is still nice to know that your business will survive you.

This is why companies like Coca Cola have been around for hundreds of years, growing and adapting to their surroundings long after their founders passed away.

So … are you interested in corporations yet?
You can file all the legal documents yourself, but when you consider all the time and effort it requires to get all those details right, why would you?

Find yourself a good legal firm, and let them sort out all the red tape. Here’s an awesome comparison of online business incorporation websites that you’ll find useful when you’re searching for a good incorporation website. Let me know if you have any questions or comments, I'd love to hear what you think!

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