The Benefits of Incorporation

If you own a business and would like to find ways to make it grow and become more viable, by now, you probably should have thought about incorporating. When you incorporate, you establish your business as an entity that is separate from you. Business owners have a misconception that incorporation is costly or time-consuming. Although to a certain extent, incorporating might be so, there are countless benefits you can get from incorporating. Here are some of the benefits of incorporation that your business can potentially enjoy if you make the right decision.

1. Tax advantages
Corporations enjoy better tax advantages including deductible health and health insurance premiums paid, and self-employment taxes (corporate income is not subject to Social Security, Workers Compensation, etc). A good accountant should be able to help you with the tax benefits you can be entitled. Furthermore, a corporation is usually eligible for more affordable rates such as in health insurance.

2. Limited liability
As a corporation, you and your business will become two separate entities so you are not risking your personal property if the business should incur debts. Corporations are provided with limited liability protection to their shareholders, such that creditor can’t purse the owners’ personal assets.

3. Business credibility
Adding an Inc. or a Corp, into your business name can help establish credibility, and will create a positive image for your employees, clients, vendors and partners.

4. Transferability of ownership
Ownership in a corporation can be easily transferred, as compared to an owned business. This means that if the owner of the business should unexpectedly die, the business can continue to operate. The ease of ownership transfers differ from one state to another.

5. Raising capital
In this setting, it is easy to raise more capital by selling shares. A single owner cannot enjoy this money-raising advantage. If you have some great idea for a business, offering our shares will allow you to raise the money you need for your new project. More importantly, most banks prefer borrowers with incorporated businesses when providing loans, so raising capital may be within reach.

6. Unlimited life
An owned business can only live as long as its owner lives. However, in a corporation, the business has an unlimited life. If the owner dies, or wishes to sell his share, the business will live on and continue to exist.

Of course, as expected, these benefits have disadvantages attached. You will need to spend time for corporate formalities, be ready for double taxation, and ongoing expenses (franchise fees, annual reports, and so on). You will also need to spend time in soliciting and answering to shareholders, and you will have less power over the company. Incorporating is not for everyone or is it the best option for every business. However, if you want to expand your business, you play well with others, don’t mind risking your assets, and are comfortable to enjoy the aforementioned benefits despite the few disadvantages, then incorporating will surely do your business a lot of good.