The costs involved are some of the factors you need to consider when you’re running your own business, and there’s no doubt that there are many when you’re an entrepreneur.
That’s why most business owners like yourself are constantly looking for ways to cut down on their expenses without negatively impacting their company’s operations. While there are many strategies to help you do so, some of them are less well-known than others.
One of these is incorporating your small business, which some business owners consider too costly to do. However, did you know that incorporating it can actually help your business save money?
How so? Let’s find out.
- Incorporating helps protect your personal assets.
One of the primary reasons incorporating your business can be an advantageous and cost-efficient move is that it can help protect your personal assets. How so?
Incorporation involves creating a separate legal entity for your business, which means that its assets are different from yours. As a result, any debts that your company undertakes will be entirely its own, so creditors can’t come after your own assets if your business defaults on payments. They can only legally go after the company’s assets, eliminating the likelihood of losing your car, house, and other assets to pay for your business’s debts.
Similarly, incorporating your business and making it a separate legal entity means that you also protect your assets from lawsuits meant for the company. So, even if your business is actually liable for the incident, you don’t have to worry about the charges bankrupting you or your family. You can easily form an LLC using incorporation services.
- You get to enjoy tax benefits.
No one likes paying taxes, whether as an individual or a business. After all, taxes take away from your profits, which means you have less money to spend on things you need for your business. The good news is that some legal business entities actually allow for lucrative tax benefits.
An LLC is the most common legal entity business owners take when incorporating, but S-Corps are steadily gaining favor among small business owners due to the unique tax benefits this structure offers.
In this case, incorporating as an S-Corp can help you save money because this legal entity allows you to pay part of your business’s earned profits as a corporate distribution. This means that you get to pay fewer taxes since distributions aren’t considered the same as salaries.
In fact, incorporating as an S-Corp can save your company up to 7% in profits – all while affording you the same protection against liability as LLCs.
- You gain easier access to additional capital.
Having enough capital to keep your business going is essential, but it can be tough to find investors willing to put their faith and money into your company as investments. After all, doing so will pose more risks for them, especially if you’re a small business.
Likewise, most banks and other financial institutions are also less willing to lend to non-incorporated businesses since the possibility of losses can be high.
That’s why incorporating your business is essential since doing so boosts your company’s credibility and establishes it as a legitimate business entity. In turn, this can make investors and financial institutions more confident in providing you with the capital you need for your operations.
When you incorporate your business, you can also open a new bank account and start a separate credit line for your business to help fund its operations.
This can be beneficial because not only does it allow you to gain the funds you need, but it also means that your personal credit score is less likely to be affected by the company’s debts.
Considering the costs and cutting down on expenses is essential when you’re running your own business. However, doing so isn’t always easy, especially when faced with various financial hurdles. Incorporating may seem like a costly endeavor for now, but it can actually save you money in the long run by protecting your assets, boosting your credibility, and offering you lucrative tax benefits. Nowadays,you can use virtual legal services Such as Legalzoom or Zenbusiness to take care of incorporation and filing annual reports.
With that said, incorporating your business can cost you money at first, but it’s a crucial step and investment to ensure that you or your business don’t go bankrupt while trying to achieve success.
