Whether you are just starting your business, or have been operating as a sole proprietorship or general partnership, you may find yourself wondering if you should incorporate. Many business owners assume it will be too costly or time-consuming— but that isn’t necessarily true according to Jim Sprouse, Vice President at Cain Advisory Group.
Below are the top 3 reasons why small business owners or sole proprietors should consider incorporating in 2015:
1) Protecting Personal Assets:
Incorporating your business is one of the best ways you can protect your personal assets. A shareholder of a corporation is not personally responsible for debts or liabilities of the corporation. Which means that business owners can conduct business without risking their homes, cars, saving, or other personal assets. However, in a sole proprietorship or partnership there is no legal distinction between owners and their business which makes personal assets more vulnerable.
2) Taxation Benefits:
Once incorporated a company’s taxable profits can be reduced by qualified business expenses, including operating expenses, marketing and advertising expenses, travel and entertainment expenses, and other costs of making a profit. An incorporated business may also deduct employee salaries, health benefits, and contributions to qualified pensions and retirement plans for employees.
3) Gaining Capital and Credibility:
Incorporating can be an essential step in having your business perceived as being more stable, credible, and permanent. It indicates the commitment that you have to the ongoing success of your business. In most cases, banks would rather lend money to corporations than to unincorporated businesses. In addition, corporations generally have access to more alternative sources of capital to pay off debts.
Although incorporation requires more paperwork and additional expense compared to sole proprietorship or partnership, it offers important legal and tax advantages that can actually save companies headaches and money overall.
Cain Advisory Group helps both small businesses and sole proprietors with the transition to S Corporation by filing articles of incorporation, completing payroll, managing accounting, tax planning and prepping, and keeping up with corporate minutes all at a reasonable monthly price.
If you are interested in learning more about the benefits of incorporating with your particular case please feel free to contact us at (858) 277-2122 for a free consultation to determine if incorporating makes sense for you!