As your business grows, you may want to consider the benefits of incorporating.  Many start a new venture with no thought about the legal structure for their business. The IRS considers “sole proprietor” to be the default structure in which your business profits are taxed on your personal tax return. While this can serve you well to start, there are several reasons you may want to consider incorporating as your business continues to grow.

  1. Protect your personal assets from creditors.  Creditors are often limited to corporate assets to satisfy a debt when you operate your business within a corporation. This protects your home, savings, and retirement accounts.
  2. Provide a personal liability firewall. Operating as a corporation helps protect you against claims made by others for injuries or losses arising from business actions.
  3. To issue shares of stock. Offering stock options to key employees as a form of compensation or issuing shares to new investors will help build your business.
  4. To gain tax flexibility. You have more tax flexibility as a corporation. Careful planning can help optimize the taxable division between your personal wages, corporate income and dividends.
  5. To enhance your business presence. Opportunities not offered to sole proprietors may become available to you as a corporation. Vendors, Consumers and other businesses often prefer to do business with incorporated companies as it sends a signal that your business is a serious enterprise.

 

Contact our office if you are still going over the pros and cons of incorporating your business. We can complete a thorough tax review that will help shed light on the impact such a move will have on your business.

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