You may be wondering if incorporating your business is ideal for you if you’re just researching a fresh business idea or already operating as a sole proprietorship or general partnership. Your business structure has a lot of implications, and incorporating your business has a lot of advantages.
The decision to incorporate a business is a big one. Maybe you’ve only recently opened your doors and are doing well. On the other side, it’s possible that your business hasn’t even started yet. Incorporating is a sensible move for most businesses in any case, and it isn’t just for well-established ones.
Every business owner should think about the benefits of incorporating.
The issue of business liability is one of the key reasons why business owners choose to incorporate. All incorporated businesses are treated as separate legal entities in the eyes of the law. This means that the corporation’s owners will not be held personally liable for the company’s financial obligations. Similarly, in the event of a lawsuit against the corporation, the owners are not held personally accountable. In simple terms, it means that the personal assets and property of a corporation’s owners are shielded from lawsuits, verdicts, fines, debts, and liens. The corporation and the corporate owner are considered two independent entities in legal terms.
Your personal assets, such as bank accounts, savings, and even your home or cars, will not be at risk if the incorporated company loses a case. Any outstanding company debt is subject to the same corporate protection rule. Even if your company files for bankruptcy, your personal assets will be safe. Many business owners believe that having a “corporate shield” is enough of a justification to incorporate.
One thing to keep in mind is that in order to maintain complete corporate protection, the corporation must adhere to its corporate structure and observe all applicable corporate laws The state in which you choose to incorporate will provide a guide on how to become a corporation and you will also be needing the help of a business attorney to help you through the process.
The increased credibility of becoming an established corporation is another reason why many small businesses prefer to incorporate. Those three letter letters, Inc., can help your business gain credibility with clients, vendors, and even potential lenders. Incorporation proves to the rest of the world that you are a real business.
Incorporating your business may even assist you in obtaining business financing. A well-established corporate organization may be more likely to receive investment than a typical small business. You’ll be able to create business accounts and borrow money in the name of the corporation once you’ve incorporated.
When you incorporate your business, it instantly gains legitimacy in the eyes of consumers, future employees, and lenders, all of which increase the amount of money you might potentially raise. Lenders view incorporated business owners as trustworthy, committed, and eager to invest a considerable amount of time, energy, and resources into making their company successful. As a result, lenders are more likely to engage in the ventures of incorporated companies. Corporations can also raise additional funds by selling shares of their company to investors. Investors are more inclined to invest in the corporation because they believe their personal assets will be safe if the company has trouble.
Corporations are set up in the most long-lasting framework. Regardless of what occurs with shareholders, officials, or individual directors, a corporation can continue to operate. By forming a corporation, you protect your business from legal troubles that may arise from other business arrangements. The business entity exists indefinitely as a separate entity, which means it can continue to operate and profit independent of the actions of those around it.
If a company is incorporated, it can plan for long-term growth. It will be simple to sell if the business owner(s) choose to do so because investors are confident that the company can continue to make a profit.
Improve your business and brand image
Your business and brand reputation aren’t solely based on the number of positive internet reviews it receives or the wonderful job it does in the community. Incorporating your business can assist you in establishing your validity and gaining the trust of potential customers. This is a significant positive for your business’s success.
Your brand is more than just a logo or a tagline. It’s the way you run your business, the appearance and touch of your location, and the things you sell. You’re not simply protecting your business name when you incorporate it. You’re also preventing your business reputation from being utilized in unfavorable ways or without your permission. It gives you brand protection.
Brand and business protection through incorporation involves protection for:
- Your business’s name
- Your company’s brand recognition (logos, slogans, and colors that represent your brand)
- Intellectual Property (any words, phrase, symbols, or designs that distinguishes your business from others.)
The tax advantages of incorporating are also a major reason why small business owners choose to incorporate. For good or worse, the legal form of your business will have an impact on the amount of taxes you pay. Because this field is continuously changing, consult with your tax professionals to see how a different business structure would affect your tax liability. In its most basic form, a standard C corporation is taxed in a convoluted manner. Profits must be taxed by the corporation. You’ll also have to pay taxes on any dividends your organization pays as well as your own salary as a business owner. S corporations are treated differently; the income earned by an S corporation is considered the owner’s personal income and is taxed at his or her personal rate.
According to some, corporations are less likely than sole proprietorships to be audited by the IRS. The reasoning for this is that sole proprietorships may overstate their business expenses unintentionally. Since corporate taxation is inherently complicated, speaking with our expert attorney specialist can help you understand the advantages and disadvantages of various business structures and taxes. Our expert attorney may also do a full business evaluation and ensure that you are following all applicable tax rules.
You may not want to sell your business, but you may wish to transfer it to someone else. A corporation is far more transferable than a partnership or a sole proprietorship. It is pertinent to mention here that your personal assets are linked to your business as discussed above in a sole proprietorship. You must first identify and sever any relationships between your business and your personal assets before transferring a sole proprietorship.
A corporation does not have this issue, making it much easier to transfer it in its current state.
Contact our Business Attorney to incorporate your business
It’s important to incorporate your business as a business owner for the reasons stated above. No matter what sector you want to serve or the size of the company you want to run, our business attorney can give you with assistance and help you through this vital, often confusing procedure when you’re thinking about starting a business and want to incorporate it. To incorporate your business, contact our business attorney to schedule a consultation.