Regardless of their size, all businesses can benefit from incorporating. Advantages of forming a corporation or Limited Liability Company (LLC) include:
- Personal asset protection. Both corporations and LLCs allow owners to separate and protect their personal assets. In a properly structured and managed company, owners should have limited liability for business debts and obligations.
- Additional credibility. Adding "Inc." or "LLC" after your business name can add instant authority. Consumers, vendors, and partners may prefer to do business with an incorporated company.
- Name protection. In most states, other businesses may not file your exact corporate or LLC name in the same state.
- Perpetual existence. Corporations and LLCs continue to exist even if ownership or management changes. Sole proprietorships and partnerships just end if an owner dies or leaves the business.
- Tax flexibility. Though profit and loss typically pass through an LLC and get reported on the personal income tax returns of owners, an LLC can also elect to be taxed as a corporation. Likewise, a corporation can avoid double taxation of corporate profits and dividends by electing Subchapter S tax status.
- Deductible expenses. Both corporations and LLCs may deduct normal business expenses, including salaries, before they allocate income to owners.
Should My Business Incorporate or Form an LLC?
Corporations and LLCs are both separate legal entities (business structures) that enjoy certain protections under the law and important benefits. Most people form a legal business structure to safeguard their personal assets.
Incorporating or forming a Limited Liability Company (LLC) allows you to conduct your business without worrying that you might lose your home, car, or personal savings because of a business liability.
Form a corporation or LLC today to protect your personal property and save on taxes.