Have you been advised that you’d be better off incorporating your business? When you started your small business, you have always imagined it to be a big one. Through the years of operation, it has grown its consumers in number and its profit higher. Is it time to incorporate your business? What does it mean to have a corporation compared to sole proprietorship of the business?
Business progress always brings about good news. It means that more customers are happy and satisfied with the product or services that you provide. But as the business expands, it is essential to consider some changes to put it in a better position. If incorporation is one of its options, it is best to learn more about it and how it could be good for the business.
Incorporation means making the business a corporate entity. It is now a separate entity from its owners. When incorporated, the business is no longer under sole proprietorship nor is it owned by a partnership. And because incorporating a company is a big step, here are some of the advantages that you can expect to enjoy.
Advantages of Business Incorporation
Limitation in Liability
Running a business comes with a list of responsibilities, and sole proprietorship primarily gives most of it to you. The liability of the business is your responsibility. But when you decide to incorporate it, you are running the business as a corporation, with limited liability on your shoulders. When the business is incorporated, you automatically become one of its shareholders. The best part of it all is that you are not liable to pay off any debt as a shareholder. Nobody can sue you for non-payment of debt as the business is considered a separate entity from you.
Better health services for employees
A business that is incorporated can offer its employees with private healthcare services and deduct a part of its payment on behalf of the employees. More importantly, as a corporation, the business can offer more benefits to the employees and make it tax-free too. The extra health care services for employees will surely give them more reason to stay and work with the company – to help it grow and become more stable for the future to come.
Business operations can entail a lot of costs. From the salary of employees to the overhead expenses including the electricity and water services. And as the business grows, the value of operations also increases. When you remain to be a sole proprietor, all the stress of raising the money is on your shoulders. But as a corporation, there is a likelihood of an increase in capital coming from its shareholders. The shares will help finance the business, not to mention as a more straightforward way to raise the share capital that you need for business.
Is incorporation of business the best option for you? It depends on the nature of your business and the industry that you are in. Each situation is different. To make the best decision, consult with a reliable accounting firm. They can help you get a complete understanding of the nature of your business and the value that it comes with.