Are you starting your own business? Are you wondering if you should incorporate it? The answer is yes! Incorporating will help you protect not only your business idea but also your personal assets.
Keep reading to learn more about the benefits of incorporating your small business.
1. Limit Liability
If you start a business and are running it yourself, you are the sole proprietor. As the sole proprietor, you can be held legally liable in the event of a lawsuit. This means that all your personal assets, such as your home and bank account, could be at risk.
To avoid this situation you should incorporate your business and form an official business entity known as a limited liability company or LLC. When you form an LLC, you become separated from your business. This act will help provide you with liability protection if your business is ever sued.
2. Privacy
If you own a business then keeping your privacy is important. You don’t want to have customers showing up at your door or receive business mail at your personal residence on your day off.
By incorporating you can establish a business address and hire a registered agent. This agent will help handle all your sensitive mail which might include any legal action that has been taken against your business.
In some states, having a registered agent is required and you may be subject to penalties or fines if you don’t have one. Make sure you check your local laws to avoid facing any legal issues.
3. Gain Credibility and Funding
When you own a small business it is important to have proper funding and a business plan. If you incorporate you might be able to find outside funding a lot easier because investors know you are a serious business with a plan for the future.
As a registered business you give your company legitimacy and it is easier to create a clear division between your personal assets and your business finances. An LLC will also make your business eligible for additional opportunities such as a nonprofit or government partnership.
If you are in need of a loan, a bank will be more likely to loan money to an incorporated business venture. This is a safer option for a bank than lending money to an unincorporated business, especially those that are just getting started.
Also, suppliers and customers are more likely to do business with a corporation because they are perceived as being more stable. When you incorporate, it gives your business a sense of stability and shows you are committed to your brand having continued success.
4. Branding
When you start your small business you may make the business name the same as yours. Once you go through the incorporation process and become a legal entity you are able to create an official name for your business.
Once your business name has been established, you can trademark it and legally own that name. The next step is to be able to market your brand and let the consumer become familiar with your product or services.
5. Enduring Existence
Once you have incorporated your business and established it as a separate entity from yourself you are legally able to transfer it to another person. This means that if you are offered a sum of money to sell it to a larger company you can do so. Or you may want to pass the company to one of your heirs when you get older or pass away.
If you maintain your business as a sole proprietorship you may not be able to sell it easily. This means you may miss out on a lucrative business opportunity.
6. Capital and Tax Advantages
When you own a small business it is important to keep your business and personal expenses and income separated. Once you have incorporated your business, you can then open a bank account in your business’s name. This will make tracking your business expenses and earnings much smoother.
It will also help you file your taxes easier and your business might be eligible for some tax savings. These savings depend on what type of entity you own so it is important to discuss this with a CPA or tax lawyer.
Once your business becomes a corporation you can also raise capital a lot easier. You can issue shares of stock in the company which will help your business develop and grow quicker.
7. How to Incorporate
If you are ready to get started incorporating your small business you should seek out incorporation services that can help get you started. These services will generally ask you some questions to establish what type of business you are and can then help you file your paperwork.
It is important for you to take this critical step for your business. Not only will it help you grow your brand but you will also be able to protect yourself legally as well as take advantage of certain tax benefits.
Learn More About the Benefits of Incorporating Your Small Business Today
These are some of the main benefits of incorporating your small business. You will want to become incorporated so you can avoid being personally liable in the event of an issue with your products or services. Being incorporated also allows you to create a separation between your personal and business finances by having the opportunity to open a business account.
Your small business will also be able to create brand awareness, credibility, and funding once it is incorporated. You will also be able to take advantage of any tax breaks or credits. You will also have the opportunity to sell your brand or pass it on to your heirs without a hefty legal tangle.
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