This guest blog is brought to you courtesy of The Company Corporation.
The process to incorporate can be simple, and take less than 15 minutes. But why should business owners consider incorporating their business? Here, we’ll bring you five reasons why businesses of all sizes, both large and small, can benefit from forming a corporation or Limited Liability Company (LLC).
- Personal Asset Protection: Both corporations and LLCs allow owners to separate and protect their personal assets. Every day small business owners are sued and held financially liable for business-related judgments if their business isn’t incorporated. Why take chances and expose your personal assets (personal savings, your home or your car) to pay these judgments? Incorporation provides you with a corporate veil which protects your personal assets from business judgments.
- Name Protection: Don’t let another business use your name in the state where you operate. Think about it: You do your research, you decide to start a business and you pick a company name that is just right. However, you skip the step of incorporating. Two years later, a competitor comes into town and uses the same name as your business. Your competitor incorporates or forms an LLC with that name in the state in which they are conducting business (which is the same state as you!). Now, your competitor can legally use your business name in the state where incorporated even though you were there first.
- Perpetual Existence: Corporations and LLCs continue to exist even if ownership or management changes. If you operate as a sole proprietorship or a partnership, your sole proprietorship or partnership ends if an owner dies or leaves the business. Enjoy the peace of mind of perpetual existence if you decide to one day pass your business to a family member or if something unexpectedly happens.
- Deductible Expenses: Both corporations and LLCs may deduct normal business expenses, including salaries, before they allocate income to owners. Log your business expenses regularly and save your receipts to help maintain an accurate accounting of your expenditures. This can be helpful to calculate deductions or to provide to the IRS during an audit.
- Tax Flexibility: Though profit and loss typically pass through an LLC and get reported on the personal income tax returns of owners, an LLC can also elect to be taxed as a corporation. Likewise, a corporation can avoid double taxation of corporate profits and dividends by electing Subchapter S tax status.
Join The Company Corporation for a complimentary webinar on Thursday, May 3rd, 2012 at 12:00 p.m. Eastern Time to learn more about incorporating your business. The Company Corporation has been helping small business owners incorporate for more than 100 years.