Executive Business Coach Chuck Boyce: Serious About Your Business? Incorporate It!The word “corporation” brings to mind images of giant, multi-national companies with instantly-recognizable brand-names and logos – companies like Coca-Cola, Apple and IBM. However, a company doesn’t have to be large or well-known to incorporate. In fact, savvy small business owners across the country, and even around the world, are discovering that incorporation offers their companies a range of benefits that are perfectly suited to the unique challenges of owning and operating a small business. Why should a small business incorporate? First and foremost, the act of incorporation protects the owners of a business from liability. When a business is incorporated, it becomes a separate legal entity from its owner or owners. So if the business goes into debt, or is involved in a lawsuit, the owners of that business are protected from financial harm. This protection is not 100% — any business involved in a lawsuit should still at least consult with an attorney, and adding business liability insurance is always a good idea. But incorporation adds a significant layer of legal protection between a business and its owner or owners. Incorporating a business also usually translates into significant tax benefits. What those benefits are depend on the state where you incorporate, which in most cases should be the state where you live, and whether a company is a C corporation, an S corporation or another type of corporation. An accountant will be able to explain the specific benefits of specific types of incorporation as they relate to a specific business, and the requirements of operating each type of corporation. In general, however, incorporation gives business owners access to corporate tax benefits and oftentimes a lower tax rate. S Corporations also allow “flow through” of income with no corporate taxes at all. When it comes to raising money to finance a small business, incorporation can be extremely helpful. Business owners can actually sell shares of their corporation to raise funds. And an incorporated business can easily be sold, since it has value separate from the value of the owner or owners. Despite these advantages, less than a quarter of small businesses in America are currently incorporated – instead, most are operated as sole proprietorships or partnerships. Why is this the case? The most likely answer is that many small business owners are simply unaware of the fact that incorporation is an available, affordable option offering real benefits to their companies. Or they may think that incorporating is an expensive and complicated process that requires the help of an attorney. In fact, this is not true. In many states, incorporating a business is so simple that it can be done online, and can cost less than $200. And if incorporation costs are prohibitive in the state where a business is located, it may be advantageous to incorporate in another state. Each business is different, and specifics will obviously vary – so if you own a small business, talk to your lawyer or accountant about whether incorporation is right for you. “Independent Executive” Chuck Boyce is an experienced small business coach who can help you get the most out of your business. For more information on how you achieve your business goals, go to www.breakingfreeblog.com. Listen to the audio here! Audio clip: Adobe Flash Player (version 9 or above) is required to play this audio clip. Download the latest version here. You also need to have JavaScript enabled in your browser. |
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