Why Should You Incorporate a Small Business?

By | April 28, 2014

What is incorporation all about?
Incorporation involves making your business distinct from the owners. Thus, your business will have separate status from the view point of the business laws of a country.

Importance of incorporation:
Incorporating your business helps it to reap multiple benefits, including protecting owner’s assents, tax benefits, and ease to raise capital when needed. Therefore, it’s important to incorporate your small business. It brings the following benefits.

Makes your personal assets secure
When you incorporate your business, as the owner you protect your personal assents. This happens because, incorporation separates assets of your business from your personal ones. When there are issues, your personal assents stay safe.

Tax benefits
Your incorporated business could bypass taxation under the S (self-employed) corporation clause. Under this, the corporate income is calculated under individual owner’s income, which makes the tax lower.

Leads to longevity of the business
Incorporating your business make its life unlimited. Even if you avoid the share or the current owners leave the company, the business continues to exist.

Easy access to loans/finance
Incorporation makes your task of raising capital for your business when needed. You do it by selling part of your stock.
You could also approach banks or financial institutions for finance because banks make preferential treatment for incorporated businesses.

Keeps owner anonymous
Incorporating your business brings the business a separate existence. As the owner of the business, you can execute transactions on behalf of your business entity. However, those involved in the transaction are your business from your end, and not your personal self. Thus, you stay anonymous and continue to part in business transactions.

Enhances credibility and builds brand in the long run
Incorporating your business makes it a legal body. This is likely to boost the credibility of your business among partners (shareholders), customers and other groups who are likely to help or do business with your hand. As the business continues to grow, it is likely to help build brand in the long run.

Attracts good people
Corporations are run professionally under the relevant rules of law. This forces them to maintain professional standards in the market. This in turn would attract good people – people with relevant skills and competencies. Thus, such businesses help nurture people looking for the opportunities.

In view of the multiple benefits of incorporation, you should consider it as a logical option. No matter whether yours is a start-up or an existing small business in the form of proprietorship, or any other form, making your business, a corporation is advantageous.

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