Incorporating A Business: Learn 7 Advantages
Why You Should Incorporate
By: John Stuart Smith|LRL Writer
This question is applicable mostly to small business owners as they
are the ones who are in a dilemma whether incorporating a business is important or not. Incorporating
a business is recommended as the benefits are too many. The small businesses start as single-owner
proprietorships and then expand gradually. They may not be sure about the incorporation and may postpone it
until a later date. But incorporating a company, even a small one, comes with many advantages.
Here Are 7 Advantages Why Incorporate Your
1. Limited Legal Liability:
Once a business completes the incorporation process it becomes a
separate entity. The liability of the single-owner becomes limited to the amount that he or she has invested in the
business and the liability is shared. In a non-incorporated company, the assets of the business person will be
seized to pay off debts but in incorporated business the debts are not the owner's responsibility.
2. Corporations Don't Die:
Corporations carry on irrespective of the people in the business. It has unlimited life
and continues even after there is a change of owners, death of owners or change in business nature.
3. Raising Financial Funds Is Easier:
It is easier to raise money by incorporating a business. The corporation can also sell
equity shares and raise capital. Corporations can get financial aid very easily and this helps the business to
4. Better Income Control:
You can control the income that's yours and pay lower taxes as your income is clearly
defined when incorporating a business. You also have better tax deferral potential.
5. Sharing Of Income:
Incorporating a business means that the corporation splits the income. Dividends are paid
to the share holders from the company's earnings. The owner can become a share holder, even the spouse and children
can be share holders and the tax bracket will be lower. The opportunity to own for stock benefits and stock options
to employees and potential investors.
6. Small Business Tax Deduction:
Incorporating a business qualifies for the small business tax deduction. This rate will be
lower than the usual tax applicable on a non-incorporated business.
7. Increased Business Potential:
When you are a corporation your business trust will increase as people tend to trust
corporations more. Some companies will do business with corporations only because of the liability
There are a few disadvantages like increased paper work and filing more tax returns. The
process of incorporating a company has a high registration fee. But all said and done the advantages of
incorporating your business are well worth it. While incorporating your business, owner(s) needs to follow a few
simple steps legally required to form a corporation and filings formalities. You can do it yourself or you can hire
a business law attorney to help set-up your company's legal structure correctly.
But first is the decision to incorporate keeping the advantages, disadvantages and cost
incurred in mind. This is followed by choosing a business structure that suits your company best. Then choose the
state you wish to incorporate in, then find the package that best suits your business and place an order for
incorporating your business. Now incorporating a business can be done online and you can even
request a meeting with a consultant for advice on how to get started on this.
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