5 Signs The Time is Right to Incorporate Your Business
|Understanding your liability when incorporating your business|
|Incorporating with a numbered or named company|
When first going into business many sole proprietors and partnerships intentionally do not incorporate their business. This decision can be made for a variety of reasons including wanting to take the time to see if the business succeeds, not wanting to incur the additional costs of incorporating during start-up phase and being unaware of some of the advantages incorporating offers.
However, once a business has established itself there can be many advantages to converting from a sole proprietorship or partnership to a incorporated business. A few signs that the timing might be right to incorporate your business include:
- You are generating profits in excess of the salary needs of the owners. If your business can retain profits there can be significant tax benefits to you.
- You are looking for investors in your business. Having an incorporated company will allow you to issue shares in the company instead of taking on debt to grow your business.
- You wish to allow key employees to have an ownership stake in the business.
- You wish to transfer your business to your children. When formulating a succession plan, being incorporated increases flexibility and your ability to effectively tax plan.
- Your clients demand it. Some clients, particularly government departments, may require their independent contractors to be incorporated.