Should You Incorporate Your Small Business?

15 May 2015
 Categories: Law, Blog


If you have a small business, one of the things you need to worry about is whether or not you should incorporate. There are going to be people who are going to give you all kinds of advice about what you should do. But the question should be is whether or not incorporating your small business is the right thing for you to do. 

Benefits of Incorporating a Small Business

There are several benefits that you may see if you choose to incorporate your small business. 

1. Protection of your personal assets: If you incorporate your personal business, you separate your own assets from your business's assets. The practical aspect to this is if your small business faces any kind of legal action or bankruptcy, the only financial or asset losses that you should face are the ones that are business related. 

2. More credibility: If you think about it, most people would rather deal with a business that has incorporation after their name. That's because it sounds like it's more professional and established. Potential clients are going to be more willing to believe what you say or the services you offer because you did incorporate.

3. Name protection: Incorporating your small business will protect your name and brand. That's because your name and brand are going to be registered. People cannot open a business that has a name too similar to yours. For example, if your company's name is Blue Widget, Inc., another company cannot use a name like Blue Widget. 

Drawbacks to Incorporating Your Small Business

Just like there are benefits, there are also going to be some drawbacks to incorporating your small business. 

1. Taxes: If you don't incorporate your business, you may be able to claim some tax credits on your personal taxes. After incorporating, you may not be able to claim those credits, depending on the laws of your state. Additionally, you will have two separate tax returns that you are going to have to file, one for your personal finances and one for your business.

2. Expense: Incorporating your business can become expensive. If you choose to do it, you are going to spend more time and money to set it up than you might do if you choose to leave it alone or to use another form of business. 

Ultimately, the decision as to whether or not you are going to incorporate lays with you. If it's something that you are thinking about, then you need to see a lawyer who handles business law so that they can talk you through the process and give you their opinion.