Most people would say build your business how you would build your house, and this is because you wouldn’t build a house without a plan and a paper trail. So why build a business without one? If you are not incorporated, you don’t look as professional as you feel. By incorporating your business, you are protecting your personal assets, will get tax advantages, and grow your business organically.
Owning a small business can be initially be a risky venture, which is why some prefer to limit their personal liability by incorporating the business. There are numerous benefits of incorporation, all of which you should fully comprehend before you decide to make your move.
1. Personal asset protection
Whether you have set up your company as a sole proprietor or you’re an overall partner, the law doesn’t see any separation between you and the company. You may not be aware but if your company gets deep into debt, you may need to state bankruptcy to get out of the situation but note this will also risk your own assets. By incorporating your business, you can save your personal assets if you should close your business or face a lawsuit against you.
A limited liability corporation (LLC) is a form of incorporation that holds you, the owner, accountable only for your investment in the business.
2. Your business name is off limit to other companies
When you incorporate, your business name inevitably becomes protected within the Country where you have registered your company. No other corporation in the Country that sells similar products or services will be allowed to use that name. If you are looking for more extensive name protection, consider filing for a trademark.
Before you choose your business name, we recommend that you do a corporate name search and trademark search to see if its available. JMR Solicitors can help you set your incorporation up. That way you won’t spend time and money trying to register a name that is already taken by another company.
3. Tax flexibility and money savings for incorporated businesses
Another benefit of incorporating your business, and one of the most vital to leverage is the many tax deductions that are available to incorporated businesses. When you go from being a sole proprietor or partnership to a business structure such as an LLC, there are numerous deductions at your disposal that are not available to individuals. Everything from tax deductions on health insurance and life insurance, to saving on self-employment taxes. Just remember tax laws are multifaceted, and its best to consult a financial advisor before claiming any deductions.
Specifically, you may see tax benefits such as:
• The ability to deduct business losses.
• The ability to claim some of your business investments.
• The ability to deduct travel expenses related to your business.
• The ability to deduct fringe benefits such as medical insurance.
• The ability to claim some daily expenses required to operate your business.
• The ability to deduct social security taxes that you are paying into the system.
4. Funding potential for incorporating business
Raising capital is generally easier for a corporation, since a corporation can issue shares of stock. This may make is easier for your business to cultivate and develop. If you’re in the market for a bank loan, that’s another reason to incorporate. In most cases, banks would rather lend money to corporations than to unincorporated business ventures. Corporations generally have access to more alternative sources of capital through which they can pay off their debts.
5. Incorporated businesses have Increased credibility
The benefits of incorporating go beyond finances. Suppliers, customers and business associates often perceive corporations as being more stable than unincorporated businesses. In a sense, having “Inc.” or “Corp.” after your business name conveys permanence, credibility, and stability, and communicates your commitment to the ongoing success of your business venture.
6. The perk of perpetual duration
The incorporated business has perpetual duration unless stated otherwise in the articles of incorporation. This unlimited life allows the company to continue to exist and conduct business, even following the untimely death of an owner, or the decision by individual owners to sell their interest in the company.
Contact JMR Solicitors to help you with the legalities of incorporating your business
Incorporating your business is a big decision so it will require some thought, planning, and a discussion with your solicitor and accountant if you think it’s necessary. If you do choose to move forward, you’ll need to make sure your business meets all the legal and financial requirements. Then, you can start filling out the registration paperwork.