In this world of financial uncertainty, a small business owner must consider incorporating their business, even if the company you run is family-owned. Simply put, you cannot afford not to incorporate your business.
Even if you are a family-run business, it’s a good idea to give incorporating a serious look because the advantages of incorporating a business far outweigh the disadvantages.
Here are some of those advantages:
1. It gives your business legitimacy. That Inc. at the end of your business name automatically gives your business instant cache to anyone who is shopping around for your service or product. It gives consumers a sense of permanency, proof that the business they are dealing with is not a fly-by-night operation. A business owner that has taken the time and spent the money to incorporate is perceived as an owner who is committed to their business and their product in a way a sole proprietor is not.
2. It makes it easier to transfer a business to a family member or to sell it. Because your business is a separate entity, it can be sold to another party or transferred to a family member. In the event you retire or die, the business, unless it is legally dissolved, continues to live on.
3. It gives the owner legal protection. Incorporating makes your business, not you personally, liable should something go wrong. This is one of the most important aspects of incorporating, especially in this shaky economy. Because if your business does fail and your business owes money, no one can go after your personal assets, such as your home, to get payments. Additionally, if someone sues you, it is your business that is liable for the wrong-doing, not you or your family personally. Incorporating gives a certain amount of peace of mind in his litigious world.
4. You may see tax benefits. As a corporation, you’ll have greater tax deductions for your business. In some cases expenses such as health care, life insurance, travel and entertainment can be deducted. Also, there are no limits to the losses that a corporation is allowed to carry forward to future tax years, while a sole proprietor is limited to the amount they can claim.
While the advantages of incorporating far outweigh the disadvantages, it is prudent to look at both sides of the coin. Incorporating requires time and money and can actually lead to higher overall taxes, according to the Small Business Administration.
Additionally, because you are filed with the state, you are also monitored by the government and as a result must comply with state and federal regulations concerning your particular business. That can mean more paperwork and time spent making Uncle Sam happy.
However, as the advantages of incorporating become clearer, many companies offer services that make incorporating in any state easy and cost effective. Several companies online provide everything the business owner needs to legally established their business.
Fees for these services vary, so it’s best to shop around for the most reputable company. A call to the Better Business Bureau is always a good idea.
