Build Your Business: Incorporate for Tax Advantages and More

If you're ready to grow your business you may want to consider incorporation. More and more owner-operated businesses are choosing to incorporate and reap the many benefits of business incorporation. These benefits range from taking advantage of tax breaks open only to corporations to reducing risk by limiting financial and physical liability. Here's a brief rundown of the benefits to incorporation for most businesses.

Limit Liability When You Incorporate

Corporations and LLC (limited liability corporations) allow you to separate and protect your personal assets from attachment to your business. Sole proprietors and general partners take on personal liability for all debts and obligations of the business. That means that if you own a business as a sole proprietor or a general partner and the business defaults on a loan or is named in a court judgment, the business' creditors can come after your personal assets to satisfy the debt. You could lose your house, your car and your personal savings. When you form an LLC or incorporate your business, you are creating a separate entity that is responsible for any liabilities, debts or losses arising from the business. Your personal assets will be safe from judgments and debt.

Advantages in Fundraising

Incorporating offers benefits in fundraising for your business as well. As an incorporated business, you can issue stock for purchase by investors or offer corporate bonds, both of which are more advantageous to your business than taking out a bank loan.

Tax Advantages of Incorporation

In addition to limiting risk and making it easier to raise funds for expansion for your business, incorporated businesses get preferential tax treatment over other types of businesses. First, corporations are taxed at a lower rate than individuals. Incorporated businesses can deduct business expenses before allocating any income to owners, and may deduct 100% of medical insurance premiums because they are a normal business expense. Your corporation can also own shares in another corporation and receive corporate dividends 80% tax-free.

Since corporations are governed by the laws of the state in which they are incorporated, the specific tax benefits vary from state to state. When deciding whether to incorporate or not, consult a tax attorney or a business incorporation specialist to find out about the benefits of incorporating in your state.

Intangible Benefits of Incorporating a Business

In addition to the benefits that can be quantified, there are other less tangible benefits to incorporating. In most states, for example, another business cannot file for incorporation using the exact name of your business. That protects your brand and your identity and reduces confusion. When you form an LLC or incorporate your business, you also gain instant credibility. The requirements of incorporation offer some assurances to other businesses, consumers and vendors that you're a "real" business, one that has undergone the requirements to become recognized as an incorporated business.

The final benefit of forming a corporation is permanence. A corporation is meant to outlast its founders and its owners. Unlike a sole proprietorship or partnership, corporations exist as a separate entity that will continue even if the original owners leave the company or die. As long as the owners keep up with the filings and follow regulations, a corporation is forever.

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About the Author

+Chris Robertson is a published author of Majon International. All Rights Reserved. Copyright 2011 (Thu Sep 29 2011) Majon International. Majon International is one of the worlds MOST popular internet marketing and internet advertising companies on the web. Visit their main business resource internet marketing web site at: http://www.majon.com