Should You Incorporate Your Business?
More than likely, at some point you are going to be asking yourself whether or not you should incorporate your business. Many people start out as sole proprietors and then incorporate later. However, there are a variety of pros and cons in deciding to incorporate. Before you take the big step to incorporate, it is important that you fully explore and understand the pros and cons of this decision so you make the best choice for you and your business.
There are a variety of great advantages to incorporating, and probably the biggest one is limited liability. As a sole proprietor, anyone who sues your company is essentially suing you as a person, and your personal assets may be at risk. Once you incorporate, you are only liable for the amount that you have actually invested into the company. This is a great way to protect yourself and your assets as well.
There are various other advantages of incorporating as well. Once you become a corporation you will be eligible for small business tax deductions. You may also see an increase in business once you incorporate as well. Incorporating also opens the door for the continuance of your company, instead of it ending with you.
While there are many great advantages, there are some disadvantages to incorporating as well. One very big disadvantage of incorporating is that it can take a good deal of money to do so. Some people find that the cost is prohibitive and decide to continue on as a sole proprietor. There is also a great deal more paperwork to deal with after you incorporate as well, and this can make things a bit hectic for the small business owner. You will also be required to fill out more tax forms every year and will have to file both for yourself and your business. At times, this can lead to a hike in your accounting fees, since many people need the help of an accountant to deal with business taxes.
Although there are disadvantages and advantages, usually the decision will depend on your unique situation. If the advantages outweigh the disadvantages, then you may benefit from incorporating. Take your time and work through the pros and cons and make sure that you understand the incorporation process and how it can help or hurt your business. Once you have done your research on the topic, then you can make an decision for your individual business.