Incorporation makes a business, firm, or organization a legal entity that is separate or independent from its owners. To incorporate a business entails a lot of paperwork, particularly writing the company's bylaws or articles, and filing the application to the authorities. Thanks to the Internet and varying technologies, having to incorporate your business or organization has become convenient.
Why should I incorporate my business? What are the benefits?
A corporation has many benefits as compared to a partnership or sole proprietorship. As a corporation, your business will be entitled to tax benefits, be more effectively able to make revenue, and the liabilities and debts of the business is separated from you. In cases where you will need to sell your company, it can have a better value as compared to a partnership or sole proprietorship.
Incorporation provides protection because it limits your personal liability. If and when an unfortunate event happens, you will not find yourself having to sacrifice your hard earned assets just to pay off your company's liabilities and debts. A sole proprietorship or partnership, on the other hand, dictates that you and your business are one and the same, and all liabilities or assets you have are shared with your business. Provided you do not neglect your business, a corporation can raise its value by selling shares.
If you choose to incorporate at the right time, you will reap the benefits. Small to medium sized businesses and enterprises can benefit from tax breaks that otherwise may not be available if you run a home based business or sole proprietorship. Many people think starting and keeping a business as a sole proprietor is the easier way and more effective way to pay less tax. In reality, corporations benefit from many privileges not available to partnerships and home based businesses. Corporations are eligible for cheaper or discounted rates for various things like insurance.
For example, if you choose to incorporate, you can now hire your employees as full time workers and afford to get them health insurance.
Incorporation's value is easily assessed, thanks to its shareholders. Given the economic situation today, it is rather hard to predict whether your business will still be able to thrive in the future. Selling shares allows your company to raise money and increase its value. Come the time to sell your business, buyers can easily evaluate how much your business is worth from a standard. You can showcase your earnings, shares, and investment opportunities.
Today, businesses can incorporate online and have a trusted third party provider to file your documents for your convenience. Some online providers even offer trademark searches and applications, copyright registrations, and DBA registrations, to name a few.
Single proprietorship or partnership may be ideal as a startup. It is more convenient at first. Nevertheless, once your business commences to draw bigger clientele base and your manpower increases, turning your small to medium scale business to incorporation may very well benefit your company in different ways.
Virgil Ladner is an economics university student whose family owns a small home based business. The writer is currently researching on how to form llc and what it means for their business to expand and form a limited liability company.
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