Whether you’ve just decided to start a business to call your very own, or perhaps you’ve already been operating a company under a sole proprietorship or with a partner, you might be wondering what would happen if you expand your current company to make it into a corporation.
Many business owners often think that creating an LLC or incorporation is too time-consuming and too costly. However, neither of these outcomes will be the case if you know what to do. Know that with the right setup and the proper procedures, you’ll gain more advantages than disadvantages with what’s to come. Some of the benefits of having a corporation can’t even be found in sole proprietorships or general partnerships.
Benefit #1 – Tax Advantages
Some corporations will often gain the advantage of having tax advantages which may or may not include savings on self-employment taxes, deductibility of health insurance premiums that are paid on behalf of a business owner, and corporate income that’s not subjected to Social Security. Other possible tax advantages include the deductibility of life insurance, along with Workers Compensation and Medicare taxes. If you want to know more what’s in store for your upcoming corporation regarding the subject of tax advantages, you may want to speak to a tax advisor or an accountant.
Benefit #2 – Limited Liability
When you have a corporation, you can provide limited liability protection to the business’ shareholders. Generally speaking, the prime owners of corporations aren’t usually responsible for the liabilities and debts of the business. Therefore, creditors aren’t able to pursue the owners’ personal assets. These personal assets include their homes and vehicles, and these items couldn’t be used to pay off the business’ debts. In comparison, a business under a sole proprietorship or general partnership will be legally considered to have the same assets as with their businesses. Hence, if you’re the sole owner of a business and it has a debt, then you might pay off the company’s unpaid sum of money from your pockets.
Benefit #3 – Unlimited Life
No, you’re not going to become immortal when you now have a corporation. Note that a corporation’s life isn’t dependent on the life of its owners. In other words, should the owner of the corporation dies or if they wish to sell their interest, then the company can still continue to exist and do business. It’s in this case wherein an owner of the corporation can transfer their right of ownership (which is reasonably easy to reassign).
Benefit #4 – Raising Capital
When you’re the sole owner of a business, it’s quite difficult to gain enough income for the company to grow. However, a corporation’s capital can be raised in an easier manner compared to a sole proprietorship because it has the power to sell stocks. Furthermore, many banks would prefer to lend money to incorporated companies when providing small business loans.
While there are many pleasing things to note about forming a corporation, it doesn’t mean that there aren’t any drawbacks in the process. For more information about what may or may not happen when you’re about to create a corporation, feel free to check out https://windsorcorporateservices.com/product/publication-order-form/.