Is incorporation the right move for you?
As a small business owner you already know running a business is not an easy task. When you actually look at the array of duties that are on the shoulders of business owners, you understand that they really don’t have it as easy as others may perceive. None the less there are many reasons why you should incorporation is good for your business.
Why it’s beneficial to try and incorporate your small business enterprise. The many advantages of how you form an LLC and limitations of incorporation will depend on the specific type of legal structure that you choose. However, there are a few advantages that basically apply to corporations as well as limited liability companies (LLC):
A complex matter that confuses most entrepreneurs is the case regarding whether or not a business should be incorporated. There are pros and cons to both sides, but incorporating your business can do you and your future success good. There are many options in the world of commerce.
Corporations
When businesses are established as corporations. This means that they are separate legal entities. Out of all the advantages the come with LLC’s is the limited liability.
We recommend you operate your corporation in a proper manner. Following this advice, will entitle any company to limited liability which makes you unshakable in the industry.
Any risk that you take, will only affect the monetary amount that you have invested in the business. For no reason will your personal assets be at risk. The same goes for any owner. None will be affected by the risk you take in your venture.
However, it can get rather risky if you have a partner and have not incorporated your business. All for one and one for all is what applies in this case. If one partner is at fault all of them can be held responsables for the actions of any other.
They are all in the same boat, sharing the same life jacket. If one goes down, all of them with shares of stock do too. This is one of the leading reasons why people choose to incorporate their businesses.
Should you incorporate your business?
There are a lot of reasons why one would want to incorporate their existing business. Either for the sake of keeping the moniker of their organization or for protection from legal liabilities.
We recommend actuality consulting a lawyer for legal advice as each specific case is different. This way a person manages to save a lot more for their retirement. However, to help you decide whether you should incorporate your business, take the following factors into consideration:
Partners
If you are not the sole proprietor of your business and have to share it with a partner, incorporation might work well to your advantage. For both partners it becomes a serious matter when you incorporate a business together.
When one of the partners makes a mistake and gets sued due to his own dishonesty. The second partner can easily claim that they had nothing to do with it and opt out of being involved in the case. This will help you protect your personal liability.
When the organization is not incorporated the story is different. Then both partners will face the consequences and the person you’re fighting against can attack the personal assets of both partners.
Costs
What is worth having dosen’t come cheap. Such is the case with incorporating your business. The contrary is a lot more expensive. All the actual paper work that has to be filed can be quiet expensive.
Depending on the size of the business or organization, you can expect to pay a minimum of $2000 annually, which is subjected to change if your business grows. This can be rather difficult for businesses to manage, especially if the revenue that they generate is relatively lighter when compared to other firms.
Even then, most organizations would opt to incorporate their businesses due to the plethora of benefits that comes with it. Besides, a business that doesn’t have enough capital will not be able to incorporate their firm without having to give up some of their personal assets and capital.
Legalities
The most important reason for incorporating a business is the protection of assets and personal liabilities. Without a doubt the best benefit that comes from incorporating your business. In case your business faces litigation, your personal assets are protected by the court of law.
However, there have been cases where even an incorporated business couldn’t save the assets of the owner of the business. For instance, if you happen to be using your business assets and capital for entirely personal purposes, then your personal assets might be at risk. Because technically the legal document of ownership is not yours, but in reality the companies.
It’s important to note that both business corporations as well as LLCs generally allow the owners (shareholders) to separate and protect their individual assets. Depending of course on the types of businesses. In other words, if you were to try and operate any sort of business as an unincorporated form of sole proprietorship, then you in effect own this business.
This means that you will be liable for all of the debts of the business. If the worst were to happen, it is liquidated due to bankruptcy or any other reason. In other words, your assets and the assets of the business are one and the same. And your creditors will be able to gain possession of all your personal assets.
Taxes
When incorporating your business in the United States. There will be various options. These options are LLCs, C corporations or S corporations. Each has to pass through taxation. Each has different rules to comply with on various taxes wether it is franchise tax or employment tax.
C corporations are entitled to double taxation which means that they will have to pay separate corporate taxes and bills in addition to their existing personal taxes and bills. The only good thing about C corporations is that the shareholders in the company can be unlimited.
S corporations and LLCs, on the other hand, do not face double taxation. These two options in this category have a great upside. They allow the owners to be taxed only for personal taxation.
Corporate taxes are not to be paid by these types of organizations. However, S corporations are only allowed up to 100 shareholders.
Incorporate Means Perpetual Existence
When their is a sole proprietor or LLC owners there is a serious implication. This means the business entitys life is intertwined with the owners. As is usally the case with unincorporated business, such as a sole proprietorship or a partnership. On the other hand, all corporations and LLCs continue to exist because of the LLC operating agreement.
In other words it is very important to incorporate your business. Regardless of any ownership or management changes that may occur from time to time. This is very different from any other tangible asset.
In the sense that it has a intangible life of it’s own. In a nutshell, incorporated business entities have their own perpetual existence that is separate and distinct from the existence of its shareholders.
Work With Professionals
If all else fails, it should please you to know that you can hire professionals. Registered agents who can guide you and advise you along the way of your LLC formation. Regardless of whether you are the owner of a big organization or of a small business, our team at BryteBridge can help you.
Whether you need advice regarding incorporation or already are the owner of an llc. Whether you are just starting your own business and would like to know more, we can help you. Call us today at 1(407)857-9002 or visit us online.