Why You Should Incorporate Your Business

As a business owner, there will come a time when you need to decide if you should incorporate your business or not.  In The United States, the majority of businesses start out as sole proprietorships, and incorporate later, when the business is up and running and, hopefully, turning a profit.

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But for many business owners, there can be great advantages to incorporating your company sooner rather than later.  In this article we will discuss the pros and cons of incorporating your business to help you make the best decision possible.

There is an old saying among business-people in America: "You will either own your own corporation, or work for someone else who does."  This quote implies the importance of incorporating in the United States, and all of the advantages of registering your company as a separate business entity.

One of the greatest advantages of incorporating is that your personal liability is limited in regards to the business.  This means that an individual can not file a lawsuit against you personally because of a matter involving your company.  Once you have incorporated your business, it becomes a separate legal entity, with its own tax number, credit rating, assets and debts.

This protects the individual from any personal liability relating to the company, and ensures that your personal property or holdings are not at stake if the company should be sued or otherwise have legal judgments made against it.

Another benefit of incorporation is the tax benefits you will receive.  Once your business is its own legal entity, you are eligible for a variety of tax deductions, including small-business tax deductions.  It is also possible to have the company lease your personal property from you to do business.  An example of this would be to lease a computer or other high tech item that you personally own to your company.  This often results in greater tax benefits, depending on your specific business situation.

While it is clear that, for most businesses, incorporating makes good financial and legal sense, there can also be disadvantages in some cases.  The most obvious of these is that incorporating takes money, and many small-business owners hesitate to spend the money necessary to incorporate before they are sure their business will be successful.

Incorporating also increases the amount of paperwork that a business owner must deal with, and if you are inexperienced in these matters, it can also require you to get professional advice from CPA's or attorneys.  But it is important to remember that these expenses will only cost you money in the short term, because the costs of incorporating our completely tax-deductible, as are any consultancy fees you may pay to a CPA or attorney for device.

The fact is, most small-business owners primary objection to incorporating is the added expense. But when you consider that the costs associated with incorporation are tax deductible, you begin to see that this is not a valid excuse. Yes, you will have to pay more money "out-of-pocket" now, but you will receive it back come tax time.  This means that your net cost over time for incorporating is usually a $0. Not bad, huh?

Although there are always two sides to every issue, overall, there are many more reasons why you should incorporate your business than not.