There are several reasons to consider converting the status of a business.
Corporations limit the liability an owner can incur from running a business. A sole proprietor is responsible for all debts and burdens incurred while doing business. A corporation limits an owner’s exposure to risk by creating a legal wall between personal and business property. Owners of a corporation separate their resources into two groups (their personal and business). As long as the company is not engaging in criminal activity the personal property of the owners is not at risk.
Reduced tax burden
While a sole proprietor may write off certain business startup and equipment expenses, it is much less than a corporation may do. With sole proprietors the IRS scrutiny on individual tax returns, which are combining personal and business expenses, may be much greater. It is extremely important to rigorously separate your personal and business financial lives when you are a sole proprietor. Additionally, as a sole proprietor, you will pay tax on all the profits of your business, regardless of how much you actually take out.
Prestige of being a real business
Introducing any company with “corp.” or “inc.” at the end of its name is an instant credibility booster. It is much more impressive to be the President of a corporation or a limited liability company than to be merely the owner of a sole proprietorship.
In short, changing the status of your business from sole proprietorship to corporation will benefit you in that it offers greater legal protection, superior tax advantages and an enhanced brand image for your company.