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Why It Is Important To Incorporate Your Small Business

Why It Is Important To Incorporate Your Small BusinessThere are a number of reasons why it is important for you to incorporate your business. While this may seem like a complex and daunting process at first, it can be relatively simple, and has the potential to provide you and your company with a number of important benefits. It is also a way of protecting yourself from problems that can arise through the normal course of doing business, acting as a barrier of protection between you as a person, and the legal entity that is your business.


There are several different types of corporations that you can choose to list your business under. The C Corporation is the most common, but it is also the most complex, and is generally only a good idea if you already have a large business base in place. An S corporation is less complicated, and better suited to small and mid-sized entities. You can also form an LLC, also known as a Limited Liability Company, which is the best pick for smaller organizations.

The main reason to incorporate your business is to protect your personal property. With a Limited Liability Company, if your business incurs debts for any reason, it is the company that is responsible for paying them. That will help to prevent the organization that is owed from being able to come after your personal assets.


Incorporating your business can also protect you against damages that may occur from your company’s products or services. If a clock you manufacture falls and hits someone, that could be grounds for them to sue. With a Limited Liability Company, the injured party will not be able to bring a lawsuit against you personally, and will instead have to file the claim against the business entity.


In addition to protection, forming a corporation can also give your company a sense of credibility, that is important when dealing with potential clients and customers. They will know that you are serious about the future of your business, and that you have invested the time, effort, and money necessary to make it a real, legal entity. That will in turn inspire confidence and produce better results when trying to make a sale.

The credibility that comes with incorporating your business can also be important when looking for potential partners or suppliers. Many wholesale companies will not do business with a retailer that does not have a federal tax ID number. There are also many freight and equipment manufacturing companies that will only sell to businesses that are legally registered. In those cases failing to file for incorporation can completely hamper your ability to do business effectively.

There are a number of important reasons to incorporate your small business as an LLC. It provides you with protection against damages due to business practices, both legal and financial, while also giving you certain benefits when filing your taxes. At the same time it provides your organization with a sense of dignity, prestige, and validation which is impossible to achieve in any other way. If you are serious about your business, then it is time to incorporate it now.




Picture by Mayur Dicosta