Incorporating your business can save you money on taxes and limit your liability for business debts. But, most importantly, it says to the world — I’m in business. And that sends an important message to you, your clients, your spouse, your friends, family and, yes, even to the IRS.
In the early months or years of your business, you may not be earning enough money to save on your taxes by incorporating, but it’s still important that you do, if you want to be making that kind of money.
You see, it’s the act of incorporating itself that says “I’m in business” and gets you on the path to earning, learning and growing.
If you are in business, and still operating as a sole proprietor, the time to incorporate is now.
Here are some other benefits:
Incorporation puts a protective wall between you and the activities of your business. Creditors, clients, and other potentially litigious entities can go after your incorporated business, but not your assets, so long as you maintain the corporate formalities of your business.
Incorporating your business will allow you to take out debt in your business’s name, and if you want to raise money from investors, you’ll need to incorporate to give your investors something to invest in.
And, even if you are not raising capital, incorporating can make it less likely that you’ll be audited on your taxes, 7-9 times less likely, in fact.
If you have not incorporated yet, the best time to change your business entity’s structure is January.
Starting the year off incorporated (rather than changing mid-year)can help reduce the paperwork burden of filing taxes as two different entities.
Consider a delayed filing, which will allow you to complete the paperwork well before the new year starts—thus avoiding the end of year pressure—but stay on the fast-track to incorporate come January.
Incorporation takes some legwork, but with sound advice and professional planning, you can reap the benefits without the headache. If you want to minimize your liability and position your business for success, begin by sitting down with a Family Business Lawyer™. A Family Business Lawyer™ can establish a sound legal, insurance, financial, and tax system for your business so you can focus on the growth and success of your business.