For many entrepreneurs who are keen to start their own business, limiting their personal liability may be foremost on their minds, and one way of doing so, is by incorporating the business. While it’s true that incorporating does require more paperwork and expense than a sole proprietorship or a partnership, it can offer a whole host of significant legal and tax benefits. It’s also important to remember that by working with a specialist accountancy firm, you can simplify the incorporation process by letting them deal with all the documentation, and should incorporating your business not be the right choice for you, they will guide you through the other options and help you choose the right entity for your business and your circumstances.
Here are 5 of the most significant advantages of incorporating your business:
- It gives your personal assets added protection
As a corporation, you can own property, carry on business, incur liabilities, and sue or be sued. Responsible for its own debts, corporation creditors can usually only seek payment from the corporations’ assets, as opposed to from the shareholders, directors and officers’ personal assets.
What this essentially means is that the owner of the business can carry on with their business without potentially putting their homes, cars, savings or other personal property at risk. If you were the owner of a sole proprietorship or partnership, however, you could potentially face unlimited liability for business and personal assets.
- You gain easier access to capital
Because a corporation is able to issue shares of stock, it’s typically easier for them to raise capital, and in turn, make it easier to grow and develop. Bank loans may also be easier to acquire as a corporation, since most banks prefer to lend money to corporations instead of other types of business ventures.
Also, corporations will usually have greater access to different sources of capital to help them pay off their debts.
- The credibility of your business is enhanced
Corporations are often seen as being far more stable by suppliers, customers and business associates when compared to other unincorporated ventures, and by incorporating your business, you can convince such people that you are credible, stable and here to stay.
- Help your business endure
Corporations are able to continue indefinitely, no matter what happens with respect to its directors, managers or shareholders, and as such, are the most enduring legal structure you can choose for a business.
- Give yourself anonymity
By offering anonymity, incorporation means that you can open a small business without ever having to make your ownership public.
It’s important to note, however, that incorporation isn’t the right solution for everyone, and only by seeking professional guidance from an accountancy company who also deal with entity management, might you fully understand your options. On that note, you’d be strongly advised to seek help from an accountant should you decide to incorporate your business anyway, since different corporate structures have different tax advantages and disadvantages, and getting to the bottom of them isn’t always easy without professional help.