Stop Holding it Off – 7 Reasons to Incorporate Your Business

Thursday, May 3, 2007 at 10:05am by David Askaripour in Operations

Ok, so you have the idea. You’ve started working on the product or service. You have your team in place. And you are pouring your heart into your startup. Now ask yourself this question: Is my business incorporated? If you said yes, then pat yourself on the shoulder and say “Rock on!” If you said no, then punch yourself in the face, just like Ed Norton in Fight Club, and say “bad boy!” I kid… I kid… don’t punch yourself in the face (unless you really want to), just make a move and incorporate your business once and for all.

Let’s go over some reason why you should take the next step and incorporate your business:

Limited Liability: This is probably the biggest reason as to why you should incorporate. As a sole proprietor anyone that feels like suing your company — for whatever reason — is essentially suing you as a person. So, if you accidentally forget to cite a paragraph that you used from a magazine and placed it on your blog and get sued for it, you’ll be the one in the hot seat, not just your company. But, on the other hand, if you had a corporation, your company would be treated as a person — it’s own entity — and the liability would be shared between the both of you. You would only be liable for the amount of money that you have personally invested in the company. Essentially, your company would be sued, not you. And, guess what, that’s a good thing.

Taxes: Don’t you just love taxes? I do! Actually, no I don’t. Ok, back to taxes. Now, when you have a corporation you are able to take advantage of the tax perks that the government offers you. This is your present for being a brave entrepreneur, increasing worldwide capital, improving the economy, and creating jobs. You will now be eligible for small business tax deductions. You will be able to get multiple write-offs on almost anything that you purchase for your company, i.e., phone bills, notebooks, fax machine, books, and even food! (these are tax deductible).

You’ll be Official: After you incorporate, your company will be the sh&T! Well, maybe it won’t be, but it’ll be official. When people see an Inc, or LLC after your company name, they’ll automatically feel more comfortable doing business with you. They’ll say to themselves: “ok, well at least these kids have an official corporation and it’s not just some strung together startup like we originally thought.” You’re likely to get more business with a corporation under your belt.

Investors: Investors will feel much more confident in investing in your company if they know that you’ve taken measures to protect yourself, and, in effect, decrease their liability as well. Only a corporation can offer this sort of protection, not a sole proprietorship.

Live Longer: If you want your company to continue to grow when you are gone (re: dead or sell the company), then incorporate. Corporations can strive on when you are dead, sole proprietorships can’t (unless you plan on rising from the dead and running the company as a ghost). If you want to build an empire, go this route.

Transfer: If you have a corporation, you can simply transfer ownership by selling your stock in the company.

Shared Responsibility: Corporations usually have formal hierarchies that spread the voting and decision-making process amongst a variety of people. This is good because it ensures that your entire company won’t sink if one idiot makes a stupid decision that can take down the entire company.

So now what? Now you’ll either want to hire an attorney to get the wheels rolling on starting your company (you can find an attorney at legal match) or use a company such as Biz Filings and do it yourself (you’ll save money this way, but be sure that you know what you’re doing). Be smart and incorporate, the advantages to having a corporation are so great and it’s really not worth the trouble “not” to incorporate.

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