As your small business grows, you’ll be faced with decisions concerning its direction. One of these decisions will be whether or not to incorporate your business.
Liability insurance can protect your small business and give you a needed level of security. Incorporating your small business through our affiliate, incorporate.com, provides you with a number of benefits that will give you a leg up on the competition.
Incorporation provides:
- Protection
- Credibility
- Tax Benefits
- Investor Attraction
Below, we’ll cover how incorporating your small business provides you with each of the above benefits, and why it’s imperative that you give yourself this advantage today.
A quick note: Incorporation may not be the best path for your business. For many entrepreneurs, existing as a sole proprietor is a viable—and even a preferable—option. Read about the benefits of incorporation below in order to decide for yourself whether or not your business is ready to take the next step to incorporation.
1. Protection
Before your business is incorporated, you’re likely operating as a sole proprietor. This can be a risky endeavor. It means that your personal assets are inherently tied to your business assets. For many small businesses, costs—and by association, risk—are fairly low. As a business grows, however, the financial risk that a sole proprietor bears grows accordingly.
When you incorporate your small business, you separate your personal assets from your business assets, thereby legally setting a boundary between them. This means that your personal assets are protected in the event that your business goes under. By forming a corporation or a Limited Liability Company (LLC), you take steps to protect your personal assets should your business falter or be sued.
2. Credibility
In many cases, maintaining the appearance and status of a home-grown business is ideal. Often, however, incorporating your business gives you a status boost that will help you win new business and catch the eye of investors.
Incorporating your small business marks you as a credible and safe source of business. It distinguishes you as a professional and will pay dividends as you market yourself.
3. Longevity
Let’s face it, you won’t be able to run your business forever. If you incorporate your business, transferring ownership when you’re ready to move on will be far simpler than it would be if you’re operating as the sole proprietor of your business. For business owners who are hoping that their business outlives them, this can be a great benefit.
Without incorporation, your business ends with you. By incorporating your business, you take steps to ensure that the next phase of your business can proceed as planned. As an added benefit, this also means that you can retain a measure of financial stability in the event of retirement or long-term disability. Forming a corporation means your business and legacy can outlive you.
4. Tax Benefits
As a sole proprietor, you’re doing a lot of work without reaping all of the possible benefits, namely tax breaks. For example, as a corporation or an LLC, you can deduct normal business expenses, including salaries, before you allocate your own income. In addition to reducing the taxes you’re responsible for, incorporating your business can help with medical insurance and retirement plans. Simply having your business incorporated opens a number of doors for improving your financial situation.
5. Investor Attraction
Incorporating your business adds credibility and makes it more likely that a financial institution will provide you with a loan. Lenders can be reluctant to extend business loans to sole proprietors, which means, if your business is unincorporated, you may have to rely on a personal source of financing, such as home equity or family loans.
Incorporating your business creates what is often called a corporate veil: an extra level of protection that allows the company to take risks and jump at opportunities while still providing a level of security for individual investors.
Partner With Canopy Today!
Your small business needs protection. For some, that can come from forming a corporation or an LLC. Your primary protection, however, should come from liability insurance. Insurance Canopy protects your business in the event that a claim is filed against you.
Our policies are designed to meet your needs, and you can purchase them online in minutes. Don’t put your business at risk—buy online today!
BY AUSTIN DYKSTRA
Austin Dykstra writes about marketing, business, and insurance for small business owners and entrepreneurs.
Austin Dykstra has written about everything from Instagram marketing to online reputation management. He is now firmly entrenched in the thrilling world of insurance. You can find Austin on LinkedIn, Instagram, or Twitter, where he’s meekly re-entering the fray after quitting during the 2016 election cycle.
