Monday, April 2, 2012

Reasons to Incorporate Your Business

Fundraising and Capital Gains
When you incorporate your business, this makes it easier to acquire business funds. Compared to bank loans, you can benefit more from issuing stocks to different investors. The same thing applies for corporate bonds. You can also easily transfer corporate ownership. This allows you to raise capitals faster and more conveniently. Banks also prefer dealing with borrowers who are a part of incorporated companies.

Tax Benefits
You can also gain several tax benefits when you form a corporation. Personal taxes often have higher rates than corporate taxes. Both LLCs and average corporations may subtract common business experiences such as wages prior to allotting income to business owners. If you incorporate your business, you can also subtract up to 100 percent worth of medical insurance premiums. You can also own shares in another business and earn tax free corporate dividends. You can get as much as 80 percent tax deduction. Other tax deductions you can apply for include travel and transportation costs, entertainment expenses, and pension costs including recreational facilities. Once you incorporate, you can acquire considerable cash benefits.
Legal Action Protection
You have better chances of protecting your personal assets when you incorporate, as it guarantees definite separation between the personal and business liability of the person. Any legal action against the company will not cover or affect your personal assets. Do take note that you only become personally liable once the court convicts you of criminal negligence.
Other than being less tangible, you will find that incorporated businesses gain more credibility. Many financial institutions and individuals consider incorporated businesses as more reliable entities. In fact, many states will not allow other businesses to use a similar name as yours once you go through incorporation. This helps prevent confusion and allow you to properly establish your brand. Additionally, if you add suffixes like "LLC" or "Inc.", you give your brand more authority. Many vendors, partners and consumer prefer dealing with incorporated companies.
Additional Tips
You need to accomplish several things to incorporate your business. You have to choose from in-state, out-of-state, or foreign incorporation. Draft a pre-incorporation agreement. This provides a guideline on what you and other members of the business should do. This also sets the responsibilities of the people including their position in the company. To make things easier, you can also incorporate online. Just make sure to satisfy all the required documents and procedures.

1 comment:

  1. This is a great topic! I'm incorporated and would love to hear more!