At some point during the life of a small business, you will be faced with the question of whether to incorporate your business or not. Incorporation comes with some additional costs, such as a generally higher startup fee and some ongoing state and federal tax liabilities, but for many businesses, the advantages of incorporating far outweigh the disadvantages.

Let’s take a look at some of those professionals so you can decide if they can benefit your company and offset the costs involved in incorporation.

Limited liability protection

Probably the most sought after aspect of incorporation is the limited liability protection provided by a corporate business structure. Without joining, a business owner is personally liable for a business’s debts or contractual obligations; If the business defaults on a loan and cannot repay it, the owner is liable for that debt.

However, when you join, your business becomes a legal entity, capable of entering into contracts and borrowing on its own. There is a layer of protection between you and the company, known as the corporate veil, and as long as you are managing the company correctly, keeping careful records, and following federal and state rules and regulations, the courts cannot divide your staff. assets to pay for business defaults.

Reputation

Incorporating your company means you can place that valuable “Inc.” or “Corp.” at the end of your business name (sole proprietorships, in most jurisdictions, cannot add a corporate ending indicating a different business structure than they have), and this means that the public can see at a glance that you serious enough about your business to take it to the next level.

There is nothing wrong with being a sole proprietor, doing business under your own legal name. But some clients have a higher level of trust in registered corporations. It may not be fair, but it is human nature, and by incorporating it, you can use this to your marketing advantage.

Longevity and structural integrity

When you join, your business takes on a life of its own. Yes, God forbid, you must move on, your business can continue to survive and pass on to other owners.

However, in a sole proprietorship environment, if the owner dies, the business ends as well. Since a sole proprietorship is directly linked to one person, there is no way to break those ties and reconnect them with another person. Certainly, a “successor” to the company can open a new company with the same name, but legally, there is no connection to the now defunct sole proprietorship.

Furthermore, contrary to a Single owner, a corporation allows ownership to be shared among many different people, up to 100 in the case of an S corporation; No limit of owners in the case of a C corporation.