Owning a company means great responsibility but incorporating offshore means greater responsibility. Many entrepreneurs are driven by the thought of expanding on the US market and choose incorporation as a way to do that. Either, you go for a C Corporation or LLC, you must be informed of all there is to know about incorporation and avoid the biggest myths about it.
Myth #1. Incorporation can wait until the product is launched on the market
Many entrepreneurs believe that it is better to incorporate the moment the product is launched on the market. Mostly, because they try to avoid legal paperwork as much as they can. In fact, incorporating in the company’s early stages can help better protect personal liabilities. Legal issues may appear before the product enters the market, and an initial incorporation allows gaining long-term capital if the owner plans to sell the company fast.
Myth #2. It is better I take care of all the incorporation steps and procedures myself
Business owners that think they can save money and time by doing the incorporation process themselves could not be more wrong. They only deny themselves proper advice in dealing with legal procedures. Also, they don’t benefit from a customized guidance meant to reveal incorporation opportunities for their business’ activity.
Myth #3. Incorporation keeps me safe from any liabilities, including personal ones
Incorporating a C Corporation or an LLC means separating your personal issues from your business ones, usually by opening a business bank account. However, incorporation does not keep owners away from situations regarding criminal activities, personal guarantees on business loans or contracts signed with the owner’s name.
Myth #4. By incorporating I can avoid state taxes and benefit from extra deductions
Some entrepreneurs are misled into thinking that by incorporating they will not pay state taxes and also, that they will have more deductions on business expenses. Law taxes allow companies to deduct any necessary and ordinary expenses no matter if it is incorporated or not. Additionally, each state applies corporate taxes that must be paid. Nevertheless, incorporations are not exempt from taxes.
Myth #5. Incorporation gives me an opportunity to shelter income
Many starting entrepreneurs think they can stack the income inside their company by not paying the profit out to their shareholders. The truth is any corporation must pay income taxes based on its profit and which is noted on the company’s tax form. Also, when profits are taken outside the corporation as dividends, owners must also pay taxes on their personal tax return. For this reason, many entrepreneurs choose to incorporate an LLC in order to avoid this double taxation.
Make sure you avoid any incorporation myth by choosing Inc. Plan (USA) as your professional guide in the incorporation process and keep yourself informed by checking out our other blog posts.