Deciding on the right structure for your business is a major legal decision that also carries weight in regard to the structure and mindset of your operations. Failing to make the right choice, or not exploring all present options, could lead you to a decision that hampers your ability to grow and prosper long term. Instead of simply making a best guess about incorporating or staying as a sole proprietorship, consider some of the benefits that come with incorporation, and see if they can make a positive impact on your business.
Enhanced Fundraising Capabilities
For many companies, raising capital to branch into new industries or build onto existing functionality is a tough task. Instead of handling these expenses with your personal funds, having shareholders purchase stock and other financial instruments, like bonds, can help you build the money you need without stressing your personal accounts. In addition to this, the potential for raising this cash from several sources, instead of just your own reserves, offers a vastly expanded set of options for where you can take your business next. For those with an eye to bigger and better opportunities, this is a major selling point for taking the plunge into incorporation.
Legal Protection and Separation
Perhaps the greatest boon of incorporating your business is the ability to separate your legal status from the company, creating two separate entities. Under this construct, should a legal matter ever arise around your corporation, only the assets related to the organization are at risk. Under a sole proprietorship, the same cannot be said for your personal interests. If all of this information surrounding liability seems a little too confusing, don’t be scared to contact a legal professional, like those at LegalZoom, to get a second opinion and an in-depth explanation of how potential liability claims could unfold.
Another legal perk comes in the form of your filings during tax season. Under the traditional private business structure, filing as one tax account with your business is the standard. When you incorporate, this completely changes. The organization files separately, in conjunction with the legal separation of liability, thus removing some tax concerns from your personal transactions. With the help of a savvy accounting department, finding exemptions and deferments can lower the tax burden on your business, creating a beneficial situation for all parties involved.
Structure and Growth
While no person lives forever, the future of your business does not have to share the same fate. Again, as a separate legal entity, your business is no longer tethered to your longevity. With a strong board of directors and other managing officers, your company can persist into perpetuity, so long as business operations are viable and cover expenses. In fact, having a strong management system is required when filing for incorporation, so the lasting benefits of this process come standard. With this kind of peace of mind, you can make decisions that span long into the future, instead of simply thinking in a short span of time.