Benefits of Incorporating you Small Business

Copyright (c) 2010 Michael Jagoda

It is fair to say that at some point every small business owner will need to decide whether or not to incorporate. It is very common for a small business to start out as sole proprietorship or partnership. When the business achieves success and grows it then makes sense to become incorporated. So how should small business owners go about doing this? The fastest, easiest and least expensive way is to incorporate online.

Should you incorporate your business online? There are many reasons to consider incorporating your small business through and online incorporation service. The main reason is that incorporating will limit your personal liability. By incorporating your small business it will provide you with protection of personal assets such as your vehicles, home, bank and financial accounts. If your corporation gets into financial trouble and can't repay debts, your personal assets would be protected. Generally, an individual shareholder's liability for unpaid debts will not exceed the amount that they have invested in the company. Thus, you cannot lose more than you've invested. Conversely, if you operate your business as a sole proprietorship, your personal assets could be seized to pay debts associated with your business. If you are a shareholder in a corporation that is operated and maintained properly you won't be held primarily responsible for the debts of the corporation. In short, if you don't incorporate your business and it gets into financial trouble then it could seriously damage your personal finances.

Also, by incorporating your small business it will make it more likely that you will be able obtain the financing needed for operating and growing your business. By forming a corporation you are demonstrating to a potential lender that you are committed to this venture. You are emphasizing how much it means to you and how much you are willing to do in order to achieve success. These are qualities that a lender will favor, and will make them more willing to lend you money.

Another reason why incorporating your business is a good idea is that it can make it easier for you to raise capital and attract investors. The fact is corporations find it much easier to raise money, allowing the business to grow and develop. Further, corporations can also raise equity capital, which is a great advantage because this type of capital doesn't have to be repaid and does not acquire interest.

One final point to consider is that incorporating your business can give it instant credibility with customers and suppliers. The public is generally more favorable to businesses that are incorporated. People simply feel more secure dealing with a business that has an Inc or Corp placed after their name.

In my opinion the advantages of incorporating your business far outweigh any disadvantages. If you are still unsure then I would suggest that you talk it over with an accountant or lawyer and make sure that whatever you decide it is a well informed decision.


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Michael Jagoda has been incorporating businesses since 1996 and currently owns and operates Start Biz Here an online incorporation an llc formation service.