While a lot of attention is focused on big corporations being the engine behind our economy, small business is responsible for a large portion of our economy. According to the US Small Business Administration in 2007 small businesses contributed half of the nation’s GDP.
The amount of money and jobs involved in small businesses in this nation is staggering. Half of the GDP of the second biggest economy in the world is nothing to sneeze at! With that kind of money and assets on the line there has been a lot of focus on incorporating businesses of all sizes.
Incorporating your business provides you protections that running it, as an individual just can’t provide. By using a corporation to run your business you gain personal asset protection. You can separate your business holdings and personal holdings. This is advantageous if something happens and your business is sued, which in this sue-happy country of ours is very possible. If you should lose, the other party would not be able to take personal assets like your house as payment.
Turning your business into a corporation also gives you a certain level of credibility. Other businesses, customers and potential sources of finance will take you a little more seriously with an INC. behind your name. You may be running your business out of your garage and using your kids for child labor, but if you’re incorporated people will take you more seriously.
Also, with a corporation, your business has perpetual existence. Once you’re dead and gone the company lives on and can be easily transferred to your heirs. Another advantage of incorporating your business is better tax rates. The government taxes income of corporations at lower rates than individuals. Different versions of corporations have varied tax structures and can lower your overall tax bill significantly.
Incorporating your business is the way to go if you’re looking for better asset protection, tax status and easier transferability. Since filing incorporation papers can be complicated and involved most people seek legal advice when going through the process. A business lawyer and accountant can help you analyze your unique situation and figure out what kind of corporate entity is best for you.
Hiring professionals like these can be expensive, and given that incorporating your business is more popular these days, incorporating services are readily available on the Internet. Companies like LegalZoom.com allow you to research, fill out and file corporate papers in several states across the nation. While companies like this don’t substitute for legal advice, they can simplify the process and are an economical alternative to hiring a professional.
Entrepreneurship and small business are vital to our economy and country. Unfortunately, you need more than a good idea and competitive nature to succeed in this country. Managing risk and protecting yourself from worse case scenarios is just as important as running a solid business. Incorporating your business is the only way to insure that your personal assets are protected and you are getting the most our tax and legal systems have to offer.