By Ajaero Tony Martins
A sole proprietorship may work for you right now, but as the business landscape evolves, incorporating a business is something that you may have to consider. Incorporation can help you separate business investments from personal investments. In a sole proprietorship, you may blend your business investments with personal investments, so they overlap. But in a corporation, what is for the business is solely for the business and what is personal is solely personal. The separation of business finances and personal finances that comes with incorporating a business can help you and your business in many conceivable ways.
In a sole proprietorship, what affects your business financially will affect your personal finances as well. If you obtain a business debt, creditors are allowed to take your personal investments such as cars, house; as debt payments. Also, if you have a personal debt and you have to file for bankruptcy, creditors may come after your business assets. Either way, once a single problem comes, you get an additional problem. That causes a stressful situation for you and your family. Incorporation frees you from both dangers through what we call limited liability. Once an incorporated business goes bankrupt, your creditors will not be able to come after your personal credits and once you go bankrupt; your creditors will not be able to come after your business assets. Either way, you and your business are safe; and you get a chance to lift your finances back to normal. You can save a business dying down through your personal assets, and you can save yourself from bankruptcy through yielding more profits in business.
Money is important in the business settings of today; the money you don’t lose is just as valuable as the money you gain. That counts taxes. The taxes you don’t have to pay can count as profit. Incorporating a business is one way to reduce taxes. An incorporated business generally has lower tax rates than an unincorporated business.
The owners of an incorporated business can also subtract ordinary business expenses, like operating expenses and salaries; before they compute the business’s income, which is taxed. Incorporation can also greatly reduce insurance premiums. (In some cases, there is double taxation – first, the business is taxed for its income, then each shareholder is taxed separately. This may lead to a higher tax payment than in an unincorporated business. There are other reasons to incorporate a business and if you determine that you may pay higher taxes upon incorporation, then you may have to count other benefits, mainly limited liability.)
There are also some non-monetary reasons to pursue incorporation, and they are not to be shirked off. Incorporation allows you to sell stocks, which can be used to boost business investment. This may be desirable in times of growth or expansion, because growth or expansion may lead to more expenses which can be paid for through proceeds from selling stock. Lastly, incorporating a business can make clients trust your business more; compared to unincorporated ones because the “Inc.” for them signifies that your business is more credible and responsible in dishing out services.
Ajaero Tony Martins is an internet marketing expert with years of experience, He can be reached at http://www.strategicbusinessteam.com/