When Should You Incorporate Your Business?

If you are running a small business from your home or an office, you may have listed it as a sole proprietorship. When you first begin this type of business, you often do not think about things like incorporation since you are not sure how successful you will be. However, you should consider incorporation as a way to protect yourself and grow your business. 


You should consult a lawyer who is an expert in creating an LLC, limited liability company, or a corporation. The former gives you some of the benefits of both a corporation and sole proprietorship. Your attorney can advise you on which route will be best for you and your business. Both offer you limited liability for debts your business may accumulate. For instance, if your business fails and you are forced to declare bankruptcy, a sole proprietorship can mean you lose your house, your cars, and other personal assets. Having an LLC or corporation means that, for the most part, the business debts will not be your personal responsibility. 

Tax Breaks

In addition to protecting your assets, incorporating can lower your tax responsibility as well. If your attorney sets you up as an S corporation, you will escape paying double taxes on income, which is possible under other business organization plans. A C corporation plan will help you deduct many business expenses. Obviously, you want to set up your company in a way that maximizes your income and lowers your taxes more effectively than a sole proprietorship can do. 


Although you probably pride yourself on your professionalism, running an unincorporated business gives you less credibility with some people. Many potential clients will feel reassured about your legitimacy if you have an Inc. or LLC behind your business name. Separating the company from yourself may also help you strike better deals with suppliers and financial institutions. If you have your own small business, you can make it seem larger to others by changing from a sole proprietorship to a corporation. It simply looks better on your business cards. 

As a small business owner, you can benefit financially by incorporating your company. This step may seem huge, but it really only requires some legal help and the filing of a few documents. For very little money, your business can gain legitimacy in the business world. You will also be better protected from business acquired debt. Consult a group like Souders Law Group soon for help with this decision.