5 Benefits Of Incorporating Your Business
Are you a small business owner looking to expand now that your business is on its feet? Are you confused about the advantages of incorporation compared to remaining a sole proprietorship? You’re not alone, many small business owners are reluctant to change the legal structure, but there are many advantages that you get by incorporating that can help improve your bottom line.
We have have outlined below five ways in which incorporating your business can benefit you, but there are many more. Make an appointment to speak with an Edmonton business lawyer for more benefits.
Limited Liability
Perhaps the best known benefit of incorporating your business is the limited liability of incorporated companies. Once you have been incorporated the shareholders assume liability, but only in the amount each shareholder invested in the company. This is much different than a sole proprietorship, which puts your personal assets at risk just to pay off debts related to your business.
As a corporation you can exercise rights as an individual without risking your personal assets. This means the corporation can own property and incur liabilities in the normal course of business.
Control Your Income
Many small business owners decide to incorporate because you can decide when you will be paid income, which provides a distinct tax benefit for you. Since you can decide when you get paid, you can choose to take your income when your tax liability will be lower.
A lower tax liability means bigger profits for you and your business!
Tax Savings
As you may already know, corporations receive many tax breaks, which is huge benefit for the corporation’s shareholders.
One particular benefit is the ability to defer paying taxes until you are in a position to pay lower taxes either by a change in taxation rates or if the company falls into a tax bracket with a lower tax liability. By deciding when to pay your corporate taxes you can save money that would otherwise go to taxes.
Another tax benefit of incorporation is the small business tax deduction, which is a lower tax rate than personal income. The small business tax deduction is just 16% on the first $200,000 of taxable income, which is likely much lower than if you made $200,000 as a sole proprietor.
Company’s Future
Any number of Edmonton’s business lawyers can help you set up to protect the future of your company, which is another benefit of incorporation. Whereas a sole proprietorship ceases to exist in the event that the proprietor dies or leaves the business, a corporation can live on forever.
If a shareholder dies or decides her or she no longer wants to be involved in the business, your company can live on. If the company has a new owner, it can still continue to do business as though nothing has changed.
With this benefit you can work with a business lawyer to set up plans for who will take over the business in your absence.
Perception
By incorporating your business you can actually improve your company’s credibility, thereby increasing your earnings. The truth is that people see those letters—Inc. or Corp.—and they think you are a stable company they feel safe conducting business with.
Incorporating your business, especially if you work as an independent contractor, can give you leads into jobs that will only deal with corporations due to some of the liability issues mentioned above.
Running a corporation is not for everyone despite the many financial benefits. If you struggle with paperwork and filing your taxes, you should be prepared because there is more paperwork and additional tax returns when you operate as a corporation.
Starting and running a corporation is also more expensive than a sole proprietorship so make sure you’re prepared before you incorporate a business in Edmonton. You may need to seek the guidance of an Edmonton business lawyer to help set your business up and maintain the increased paperwork throughout the year.
Get more information to see if incorporation is right for you: