11 January, 2024
Often incorporating a business is very lucrative idea when you are planning to start a business but in reality, it is an important decision. Also, another question is whether an investment should be made through an incorporation. One of the most crucial choices that you'll need to make as an entrepreneur is whether you should incorporate your business or not. Incorporation of a business is a legal process and can be done based on jurisdiction you choose. Also, it transforms your business into a separate legal entity, distinct from its owners. To help you navigate this decision, Harcharan Grover of ‘Grover CPA Professional Corporation’ is here to provide valuable insights and guidance.
1. Limited Liability Protection
In simple words, incorporating a business helps you protect your assets from personal liability. In legal language, there is a corporate veil that makes a corporation as a separate legal entity separating the business owner from personal assets. In difficult situation when business has a problem, owner can protect personal asset. So, when you wish to protect your personal assets, you needed to make the decision to incorporating your business.
2. Tax Considerations
Incorporating a business can offer tax benefits like a benefit of low tax rates due to small business deduction which is not available to non-incorporated businesses. These special low rates are available to a specific type of incorporation, so it is important to seek a professional advice whether your corporation will be able to enjoy the low tax rates.
3. Access to Capital
If you are planning to expand, and looking for an additional capital, then incorporation will be a better choice for you. Sometimes, seeking an outside investment or loans to fund your business may be beneficial for your business. Incorporation can provide opportunities to access capital.
4. Compliance Requirements
Incorporating a business can lead to more compliance as business will need to maintain books, file an annual return, maintain minute books etc. In addition, the corporation need to maintain corporate records on timely basis. This will involve an extra cost for you.
5. Long Term Vision
Incorporating a business helps in estate planning and other tax saving strategies. In other words, incorporated business is easy to pass to next generation and provides tax efficient strategies.
Before making a final decision, one should consider the various advantages like limited liability, tax advantages, access to capital and creditability etc. and disadvantages like increased cost, complexity, compliance etc. To make an informed decision, it is important to seek a professional advice from a professional. We at Grover CPA Professional Corporation can help you making a crucial decision. Remember that the final choice should align with your business’s unique needs and goals to ensure the success and growth