Benefits of Incorporating

Incorporating your business is one of the most important and exciting aspects of being a small business owner. You’ve done all your research and compared entities, and you think you want to incorporate. Take a look at a few benefits of incorporating that you might not be aware of.

Incorporating gives you limited liability protection from the corporation’s debts and obligations.

One of the most attractive benefits of incorporating is the limited liability afforded to the owners of the business.

Business incorporation results in a new legal entity, a legal “person”—your corporation. That corporation, legal entity that it is, can enter into contracts, take out loans, and take on other obligations and responsibilities. But what happens if your corporation defaults on that loan? Unlike in a DBA, where the business and the owner are actually the same entity, incorporating a business ensures that the owners—and their finances—are legally separate from that of the corporation.

Of course, it would be a fallacy to assume that your assets are 100% safe from the courts if your corporation defaults on a loan simply because of the corporate structure—there are certain corporate formalities that must be followed to keep those personal assets protected. But as long as you’re following those formalities and not conducting business improperly—maintaining and paying corporate officers who have no actual job duties, for instance, or comingling your assets with that of the corporation—you can enjoy the limited liability protection a corporation offers.

Incorporating gives you a credible, professional image.

When you incorporate a business, and you’re finally able to put a corporate ending like Inc., Co., or Corp. on your business name, it shows potential customers that you’re serious about your business.

A sole proprietorship DBA is typically a smaller-scale business structure—because the owner is 100% liable for the business, DBAs are frequently used by smaller companies with smaller financial risks or overhead costs. If the business loses money, the owner personally loses money.

On the other hand, incorporating a business, even a single-owner business, is a route many companies take when they must invest significantly in things like warehousing costs, building leases, inventory, employees, and other areas—not because there’s anything wrong with a DBA (there’s not!), but simply because not all business owners are comfortable with being personally liable for that much potential loss.

Incorporating gives you significant tax advantages.

One of the benefits of incorporating is that your corporation is not subject to the 15.3% self-employment taxes (such as Social Security, Medicare, and workers’ compensation, among others); only the salaries distributed to employees are taxed.

Another advantage of a corporation is that it can offer a 401k, which both the employee and the employer can contribute to.

Click and Inc makes incorporating simple.

When you incorporate a business with Click and Inc instead of a corporate lawyer, you enjoy high-quality, accurate filings at significant cost savings. We take the paperwork off your hands for you, leaving you free to run your business—and we provide many ongoing business services that can help you as your business grows.

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