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Why incorporate your small business?

Why incorporate your business?

I have been a small business owner for the better part of two decades. I can confidently proclaim that the only prediction about the future that I correctly made is that the future is unpredictable. As a sole proprietor every legal and financial peril that affected my business affected me personally, and vies versa. A family crisis wiped out my cash, I then had to file personal bankruptcy reorganization to protect my home. I was literally sweating bullets for fear that suppliers and trades people would find out and shut off my income when I needed it most. After I lived through that nightmare I decided I would never be a sole proprietor again!

Having a corporation legally separates you from your business, offers protections from business creditors personally, may give you tax advantages and more. Review this brief summary, it highlights some advantages in forming a corporation. Check with your own counsel and tax advisor if it's right for your business.

A Solution for business people!

Incorporate Online for only $50 plus state fees. Click here!

Banks identify you by your social security. If you form a corporation your corporation will be identified by it's FEIN or federal employers identification number also referred to as a "95" number as they start with the prefix 95. When you incorporate your business aside from possible tax advantages and limiting personal liability you create a new entity. If you personally had problems with ChexSystems the "new identity" would not. Talk to you tax advisor and an attorney to get a complete understanding of all the aspects of incorporating.
Incorporate Online for only $50 plus state fees. Click here!

Business Structures

Find out if you are paying to much in taxes and putting your personal assets at risk by not having the correct business structure.

What business structures are available for your business.
Which business structure is best for building business credit.
Benefits of a corporation.
When the best time to incorporate is.
When to use a S Corporation.
When to use a C Corporation.
When to use a Limited Liability Company - LLC

What business structures are available for your business.

Sole Proprietorship
General Partnership
Limited Partnership
S Corporation
C Corporation
Limited Liability Company (LLC)

Sole Proprietorship -
The simplest form of business in which a sole owner and his business are not legally distinct entities; the owner is personally liable for business debts.

General Partnership -
A partnership in which there are no limited partners, and each partner has managerial power and untitled liability for partnership debts.

Limited Partnership -
The limited partnership has limited and general partners. The general partners manage the business and are individually liable for the debts of the partnership. The limited partners are limited in the amount they can lose, by the amount of money they invested in the partnership.

S-Corporation -
A corporation that is eligible, and does elect to be taxed under the Subchapter S of the Internal Revenue Code. Basically, shareholders pay tax on the corporation's income by reporting their pro rate shares of pass-through items on their own individual income tax returns.

Corporation -
A corporation is an organization authorized by state law, to act as a legal entity distinct from its owners. A corporation has it's own name, and has it's own powers to achieve legal purposes, and therefore, is a separate legal entity.

Limited Liability Company (LLC) -
The LLC is a hybrid between a corporation and a limited partnership. LLC's provide protection from personal liability, just as corporations do, and yet LLC's receive the tax treatment of limited partnerships, or a C corporation, whichever the members of the LLC desire

The best structure for building business credit

The best structure for building business credit is one that will:

Separate you from your business.
Has it's own tax identification number.
Separates the debts of the business from that of the owners/officers.

The business structures that will do this are:

S Corporation
C Corporation
Limited Liability Company (LLC)

This is not to say that building business credit can not be accomplished with a sole proprietorship or partnership. We will work with any business.

Benefits of a corporation

The benefits of a S corporation, C corporation or LLC:

Limit personal liability of officers and owners.
Protection of personal assets from the business.
Protection of corporate assets from the owners and officers.
Build a separate business credit profile.
Easier to raise capital.
Easier to solicit investors.
Lower tax liability.
Corporate Image.
Lower risk of IRS audit.

When is the best time to incorporate?

The best time to incorporate is when your business

Has over $35,000 per year in sales.
Is a high liability business.
When you want to take advantage of the many tax benefits of a corporation.
When you want to take advantage of the many retirement plans for officers/owners.

(The above criteria is only a guideline. When making a decision to incorporate you should have expert advice from a trusted advisor before moving forward.)

Business Structures

When to use a S Corporation.

When the owners live in a state with no personal state income tax.
Have one or two individuals who own the company. (Can be as many as 35)
Have sales less than $250,000.

What a C Corporation is used for.

When the owners live outside the country.
When the owners live in a state with a state income tax.
When several individuals are involved in the ownership.
When other entities are in involved in the ownership.
Have sales greater than $60,000.

When to use a Limited Liability Company - LLC

Any partnership.
Owning real estate for investment purposes.
Have several entities that own the business.
Looking for complete protection of the owners personal liability.

FIRSTGOV Business Gateway
Business Links
U.S. Business Advisor
U.S. Department of Commerce
U.S. Small Business Administration
Small Business Advocate
Social Security Online
U.S. Mint
Wall Street Journal
Washington post
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