Countless business owners are hard at working trying to expand their commercial empires. Yet, many of them aren’t making use of incorporation, an incredibly powerful tool that could help you take your business to the next level.
Startups just foraying into the marketplace and established businesses alike can benefit from incorporating, something that’s usually far easier and much more affordable than many people initially believe. Here’s why you should include your business, the many benefits you’ll derive from it, and the common mistakes to avoid making yourself as you attempt to do so.
What Is Incorporation?
Let’s begin by describing what incorporating your business actually means. Incorporating your business means you’ll be filing some paperwork and paying some expenses so that you can turn your business from a sole proprietorship into a corporation, which can help you protect your personal assets and drastically increase your chances of gaining access to much-needed capital.
When most people think of corporations, they logically imagine huge skyscrapers jam-packed with a multitude of employees. Still, the truth of the matter is that your small business can be turned into a corporation if you know which steps to follow.
One of the primary reasons that business owners incorporate is to protect their personal assets from a lawsuit. If your business is a sole proprietorship and gets involved in an expensive lawsuit or finds itself going bankrupt, your personal assets could be on the line – this includes not only your bank account but even potentially your vehicle and home.
Of all the corporation basics worth familiarizing yourself with, learning about personal accountability and protecting your assets is one of the most important. As Fox Business helpfully points out, protecting your personal assets is only the start when it comes to leveraging the privileges associated with incorporating.
Corporations often enjoyed additional credibility, for instance, as many consumers are more liable to trust an “official corporation” than they were a small business that they may not be familiar with. Sure, local mom and pop shops are usually trusted. Still, a myriad of small companies has to contend with customers not always knowing who they are or trusting them in the first place, indicating why incorporation is so widespread these days.
Even your advertising campaigns can benefit from incorporating – by giving the appearance that your brand belongs to a massive corporation, for instance, you can exude the image of financial success and stability even if your small business is only just beginning to find its footing in a competitive marketplace.
Raising Money And Maintaining Your Privacy
Additional reasons to consider incorporating your small business include that doing so will simultaneously make it easier for you to secure future funding while also enabling you to maintain your privacy. Snoopers are everywhere these days, especially with digital technology making it easier than ever before to look somebody up, but incorporating can ensure your privacy isn’t violated solely because you decided to start your own successful business.
Corporations also have a myriad of ways to raise money that other business types can’t rely upon. Your small business likely can’t issue shares to investors in exchange for cash, for instance, but incorporating would allow you to tap into that source of revenue so that your budding business can quickly blossom into a thriving commercial empire.
Nevertheless, it’s never easy to organize a company, and business owners thinking about incorporating should know that you’ll have to deal with the paperwork and associated fees when undergoing this still-worthwhile process. You should also know that corporations have an unlimited lifespan. In contrast, your sole proprietorship or partnership could end with the untimely death of an individual, and your corporation will continue to exist indefinitely until it goes bankrupt.
Of course, corporations can also deduct certain expenses from their taxes, though this is a complicated effort that should only be undertaken after you’ve thoroughly studied up on the ins and outs of the process. In time, you may discover that incorporating saves you vast sums of money in taxes, but always be read your paperwork carefully before signing on the dotted line.
Millions of small business owners consider incorporating every year precisely because it’s incredibly advantageous when done correctly. After incorporating, your small business may very well be driven to new and loftier heights than ever before.
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