Businesses and companies have always benefited from incorporation. This is a fundamental way to separate your business life from your personal life. Listed in this article are the advantages of company incorporation.
To begin with, company incorporation promotes business longevity. There is nobody that is immune to death and you should be able to keep your life out of the limited brackets. You need to abhor having a sole proprietorship as it will eventually die the moment you die. As a result of company incorporation, you will always have a way to have another person succeed your business and live long after your death.
The other fundamental merit for incorporating your company is the limited liability. The moment you separate your business from your personal life is the moment you embrace and benefit from limited liability. In other words, you will never be responsible or liable for any company’s debts whatsoever. Where your company is sued or even files bankruptcy, you will never be affected personally whatsoever.
With company incorporation, you are assured of enjoying lower tax rates. Did you know that sole proprietors are enrolled through a full tax rate? This is a plus for you as you will be paying taxes at low rates and annually.
This is a golden chance for you to benefit from tax deferrals. Whenever you have an incorporated company, you are always taxed on your income and nothing more. In other words, anything that is not part of your income is not taxed. Where you choose to not collect your salary from your company, you will not be taxed. This is very different when compared to the sole proprietorship as they will have to file taxes for all the profits.
Companies are not immune to losses and where you incur losses, you will never be allowed to pay taxes. Businesses like sole proprietorship will never have a chance to carry their losses forward to another fiscal year. However, with an incorporated business, your losses will be scattered and carried forward to the other years.
Finally, where you have incorporated your company, you will have multiple payment options. For instance, you are to determine whether you will pay your stakeholders via salary or dividends. Each will have its tax advantages. Where you have hired family members, you could have their salary filed as company expenses. Alternatively, you could decide to receive your salaries as dividends which are lowly taxed.
There are so many benefits of incorporating your business. The points above are just but a few. Therefore, make a point of incorporating your business and jettison sole proprietorship.