How To Decide When It's Time For Business Incorporation
You may have been wrestling with the idea of business incorporation for some time, but how do you know when it's time to finally take the step. Here are a few things to keep in mind with regard to the time frame.
Whether you're setting out to form a full corporation or a limited liability corporation, the biggest advantage is likely the fact that the company becomes the larger liability holder for debts of the company. The fact is that the owners then become at least somewhat less liable for debts - including taxes - of the company.
Here's a very general overlook at how business incorporation provides that protection.
As a person who is working on computers, you become liable for several aspects of the work. You may personally be sued for problems related to the work you performed. As an incorporated business or limited liability company, the company itself becomes liable, meaning that you personally are less responsible.
The person who sues the company can only collect against the assets of the company, rather than against your personal assets.
Tax issues are another reason for business incorporation and you'll find that there are some real benefits to becoming an incorporated business or limited liability company over holding the assets and claiming the income personally.
So how do you know when it's time to take on the challenges of business incorporation? Ask yourself a few questions.
Are you performing work, selling products or providing services that you could theoretically be held liable for?
Could you withstand the impact of a lawsuit or judgment related to the work you perform, services you provide or products you sell?
If you answer "yes" to either of these questions, it could be time for business incorporation.
Remember that business incorporation isn't the end-all answer for protecting your personal assets. Be careful that you create a separation between the company and your personal assets. That will typically mean separate bank accounts.
You'll also need to keep separate books for your business and your personal assets. You have to be prepared to keep those records and to produce them for taxes and other financial situations.
Business incorporation is definitely an important way to protect yourself as the sole owner of a company, whether it's a small business or a fast-growing company. Just be certain that you can meet the demands of incorporation before you take the step. Once you commit to the incorporation, you're also agreeing to obey the laws related to that decision.
Whether you're setting out to form a full corporation or a limited liability corporation, the biggest advantage is likely the fact that the company becomes the larger liability holder for debts of the company. The fact is that the owners then become at least somewhat less liable for debts - including taxes - of the company.
Here's a very general overlook at how business incorporation provides that protection.
As a person who is working on computers, you become liable for several aspects of the work. You may personally be sued for problems related to the work you performed. As an incorporated business or limited liability company, the company itself becomes liable, meaning that you personally are less responsible.
The person who sues the company can only collect against the assets of the company, rather than against your personal assets.
Tax issues are another reason for business incorporation and you'll find that there are some real benefits to becoming an incorporated business or limited liability company over holding the assets and claiming the income personally.
So how do you know when it's time to take on the challenges of business incorporation? Ask yourself a few questions.
Are you performing work, selling products or providing services that you could theoretically be held liable for?
Could you withstand the impact of a lawsuit or judgment related to the work you perform, services you provide or products you sell?
If you answer "yes" to either of these questions, it could be time for business incorporation.
Remember that business incorporation isn't the end-all answer for protecting your personal assets. Be careful that you create a separation between the company and your personal assets. That will typically mean separate bank accounts.
You'll also need to keep separate books for your business and your personal assets. You have to be prepared to keep those records and to produce them for taxes and other financial situations.
Business incorporation is definitely an important way to protect yourself as the sole owner of a company, whether it's a small business or a fast-growing company. Just be certain that you can meet the demands of incorporation before you take the step. Once you commit to the incorporation, you're also agreeing to obey the laws related to that decision.