What are the advantages of incorporating a business?

Are you wondering if you should incorporate your business? Whether or not to incorporate is something most business owners contemplate. The video below outlines some of the advantages of incorporating your business.

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Video Transcript

Whether you just started a business or are at the point of growth and expansion, the question of incorporation comes up — and you’re probably asking yourself whether it’s right for you and your business. Incorporating your business is a big decision and it can provide many fiscal, legal and financial advantages. Here are some of the advantages of incorporating a business.

Legal protection

When you incorporate, your business becomes its own legal entity, granting you, the owner, limited liability. Limited liability protects shareholders and owners from being held personally responsible for the company’s debts or financial losses.

Lower tax rates

Once you incorporate, you will file the tax returns for the business separate from your own. Generally speaking, corporate tax rates are lower than personal tax rates.

Ease of ownership transfer

Corporations own the assets of the business. Individual ownership in the corporation is in the form of shares. This makes it easy to transfer ownership by buying or selling shares. This is attractive to angel investors and venture capital firms as they know they can buy or sell their ownership easily. 

Increased credibility

People perceive incorporated businesses as more stable than unincorporated ones. Potential investors, suppliers, customers, employees and lenders will see that you are serious about the business and thinking about its long-term existence. As there are financial costs associated, being incorporated is seen as a sign of professional commitment.

Continuous existence

Corporations exist in perpetuity unless formally dissolved. This means the business can live on even if the founders pass away. When shareholders pass away, they pass on their shares either through their estate or through a sale. With other business structures, a business stops existing once the owner passes away. 

Better access to capital

Many government loans and grant programs are only open to incorporated businesses. Corporations can also borrow money at lower interest rates. Once incorporated, money can also be made by selling shares or bonds to shareholders. The increased credibility that comes along with incorporation can also get you more attention from potential investors. 

There are many advantages to incorporating a business. Deciding whether to incorporate your business takes time and careful consideration. Every business is unique and it’s important to know what’s best for yours. Speak to a professional to get more information about whether incorporating is the right decision for you.