Top 5 Benefits of Incorporating Your Business
While there’s no rule stating that you must incorporate your business, doing so offers several key benefits. If you currently operate your business as a sole proprietorship or under a general partnership, transitioning to a limited liability company (LLC) or corporation can prove well worth the minimal investment of your time and resources. To learn more about the top 5 benefits of incorporating your business, keep reading.
The Benefits of Incorporating? It’s Easier to Raise Capital
Businesses of all shapes and sizes need capital in order to succeed. As a sole proprietorship or general partnership, you may run into trouble raising capital. By incorporating your business, you’ll have an easier time convincing investors to fund your idea. And depending on your structure of incorporation, you may even be able to sell stock of your company in exchange for capital.
A lesser-known benefits of incorporation is the simple fact that it’s easier to create retirement funds like a 401k. Even if you have no plans on retiring in the near future, any seasoned accountant will agree that it’s best to start saving for retirement at an early age. The earlier you begin saving, the sooner you can retire — and the more money you’ll have, which is always a plus. Incorporating your business can help with retirement savings by giving you access to 401k and similar funds.
Liability Protection of Personal Assets
Of course, the single most notable benefit of incorporation is liability protection of personal assets. Business owners who fail to incorporate are automatically classified as sole proprietorships, in which case their personal assets are not protected from business-related activities. In other words, a client or customer could file a lawsuit seeking your own personal assets, such as the money in your bank account and/or the equity in your home.
Ask yourself: which business would you trust me: Business A, which operates under a sole proprietorship using the owner’s personal name. Or Business B, which operates under a Corporation using an actual company name (e.g. Business B, Inc.). If you chose the latter, you aren’t alone. Most people will agree that incorporated businesses are more credible and trustworthy. In turn, customers and clients will feel more comfortable purchasing their respective products or services other, unincorporated businesses.