Incorporating Your Business

There has been a surge of individuals incorporating small and medium-sized businesses over this economic downturn in the world economy.

Incorporating your business is an easy way to protect yourself from the liabilities of running a company that will likely have debts and obligations different from your personal life.

Incorporating will also afford you certain tax benefits that can help immediately and also down the line as your business grows.

When you incorporate your business:

1. Your business takes on a tax entity of it’s own. Your business has it’s own tax id number – which is similar to your social security number. Your company can be taxed just like an individual, or you can choose another tax structure by application to the IRS. Subchapter S is one such election. Choosing an LLC (Limited Liability Company) can be another way to avoid direct taxation of the corporate entity.

2. Your business assets are separate from your personal assets. There are strict rules for not commingling business and personal finances in order to remain separate, but it’s not that difficult to do. This can help keep your personal items of worth – including your personal bank accounts out of reach of the courts in the case of litigation against your company.

3. Your business will gain respect in the eyes of other businesses. Lenders are more likely to loan you money if you’re a corporation than they are if you are simply a sole-proprietorship or partnership.

Companies that remain unincorporated are not seen as good investments and not very professional when compared to incorporated companies.