Forming a corporation or LLC can be hugely beneficial to the owners of a company. Inc. Plan can help you decide what is the best course of action for your business. Here is a rundown of some of the benefits of incorporating your company:
Protection of Personal assets
Forming a corporation or LLC makes it possible for business owners to separate their personal assets from litigation brought against the business they own. Court proceeding can only takes assets from the business itself. Legal entities that are properly structured insulate owners from most debts and liabilities. The corporate shield can only be pierced if the business conducts criminal activities.
When a business files with the secretary of state it (in most cases) prevents other businesses from using that name, or a name that is “deceptively similar”. This helps protect your company’s reputation and prevents customers from being confused by companies with the same or similar names. Forming a corporate entity helps establish a company’s brand.
LLCs and Corporations are both allowed to deduct normal business expenses from company profits before the company allocates revenue to owners. This reduces the overall tax burden on the business entity’s owners. Thing that can used for deductions include using a home office, a car for business and education costs.
Corporations live on after they are sold or if their owner dies. The company will continue to conduct business even if management changes hands. Partnerships and sole proprietorships cease to exist if an owner leaves the business for any reason. Giving your business “corporate personhood” makes it easier to sell the company, because there is no question that the life of the company continues independently.
Besides being able to deduct business expenses and capital losses there are other tax benefits to starting a company. Self employment tax can help reduce your overall tax burden by splitting business income between a private individual and a company. Money paid for self employment taxes can be also be deducted as a business expense. In some cases it is also possible to reduce overall tax by paying for health insurance premiums.