4 Important Reasons to Incorporate Today

by ExpertEntrepreneur

Have you been putting off incorporating or forming an LLC? Here are 4 very real and important reasons to protect yourself and your business.

Maybe you've been thinking about incorporating your business or forming an LLC, but you've been putting it off for one reason or another. The truth is, if you are operating a business without this protection, you are putting your personal assets -- including your home -- at risk. The following are four important reasons to stop putting it off and form an LLC or incorporate your business right away.

Reason 1: You are sending a bad message

If you are operating as a sole proprietorship or a general partnership, what message are you sending to your customers? Many will assume you are not really serious about your business, inexperienced or just testing the waters to see if you are sure about your business. Think of forming an LLC as a way of marketing your company and sending a message to your customers that you believe in what you do.

Reason 2: You may enjoy tax benefits

Choosing to run your business without incorporating may mean passing up on many potential tax benefits. As a sole proprietorship, you are paying self employment taxes at the highest possible rate. When you incorporate or form an LLC, you can turn what would be non-deductible personal expenses into true business expenses. The corporate tax rate also tends to be much lower than the rate paid by individual business owners. Both corporations and LLCs offer unique tax benefits, so it's important to explore all of your options. 

Reason 3: You need to protect your assets

While some businesses are riskier than others, not incorporating or forming an LLC will put your personal assets at risk no matter what type of business you run. It takes just a single lawsuit to potentially destroy your personal credit rating and put your home and even your retirement savings at risk. What happens if a vendor comes after you for business debts you cannot pay? What if a customer gets hurt on your property? If you incorporate or form an LLC, your company will be responsible for its own debts, not you.

Reason 4: You will have better opportunities to raise capital

Finally, incorporating makes it easier to raise capital for your business from investors, whether you want to borrow from a lender or sell shares. When third parties choose to invest in a business, there must be a legal entity to accept money, and most investors want to work with corporations for the tax benefits they enjoy. 

Updated: 03/10/2015, ExpertEntrepreneur
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