Incorporation Has Advantages and Disadvantages
Author: Keith Huggett
Ask almost anyone who has more than a few days' experience in the world of business about the benefits of business incorporation, and you are sure to hear a vague response about tax shelters and personal liability. Although those are accurate ideas, they are not the only benefits of incorporation. Similarly, there are also disadvantages associated with forming a corporation.
Benefits Of Incorporation
Business incorporation automatically increases your ability to fund a company through the sale of shares, and it positions an organization for future move into the public arena. A corporate status can also provide some protection against personal liability for the individual. Finally, some corporate structures provide limited tax benefits. Contrary to popular belief, however, not all corporate structures provide for reduced tax burdens.
Corporate Disadvantages
Corporations require a certain level of structure and the observance of formalities and meeting requirements set out in state and federal legislation. Corporations can be expensive to start and some types of corporations can provide for a heavier tax burden, especially for fledgling businesses. Corporate entities are also required to complete annual and quarterly filings with a variety of regulatory bodies, creating an added expense in labor and data maintenance.
Who Should Incorporate?
A quick Google search on business incorporation will garner millions of hits, and everyone seems to have a different idea on who should incorporate. The truth is, there is not a formula that indicates whether your company would benefit from incorporation. The decision about whether that step is right for your company at any give time depends on individual information regarding company finances, staff size, business model and the state of the market. Most companies choose to seek expert financial advice and review numerous business models prior to making the decision for incorporation.
If you are considering business incorporation and need more information about whether your company would benefit from such action, The Tax Office, Inc. can help. Contact us today for a free tax analysis to find out about our expert services.
