How To Know When Incorporation Is The Right Step For Your Small Business

Many small business owners start their commercial ventures informally. Formulating ideas, gathering initial funding and trying out operations are activities that often take place before prospective business owners think about incorporation. A few entrepreneurs will actually choose to formally register their companies as business structures from the start, but it is generally better to wait until a clear picture of the business structure emerges. With all this in mind, here are four signs that let you know the time is right for incorporation:

Legislation Favors Business Owners

Tax reform was more than just a political victory for the Trump administration. For entrepreneurs and self-employed professionals, the prospect of a 21 percent corporate tax rate is simply too enticing to ignore. There is also the fact that the American economy is changing in favor of small business operations. If you check the corporate division of your Department of State, you will likely find links to programs and incentives for small businesses, but you will also have to incorporate to access these benefits.

You Need to Enter Competitive Bids

Some lucrative government contracts are only open to registered companies. Even if you are a self-employed professional with a proven track record, you may be missing out on certain opportunities if you are not incorporated. At a time when the business-to-business sector is booming, it makes sense to incorporate.

You Acquire Business Assets

It is always a good idea to separate business equipment and supplies from your personal property. You may be able to take advantage of depreciation provisions to lower your tax liabilities, and the valuation of your company is bound to increase when assets are formally registered. Let’s say you find a pizzeria that is liquidating ovens and other equipment at bargain prices; to take advantage of this opportunity, you will want to be able to make the purchase in the name of your registered business.

You Plan on Doing Business with Partners

Two of the most powerful tech giants in history, Apple and Microsoft, were conceived as partnerships but incorporated under different business structures. These tech companies sought the advice of a corporate lawyer for the purpose of deciding how they should form their business entity. A limited partnership may not offer the same advantages of a limited liability company, and corporations may offer greater tax benefits compared to LLCs in 2018. These are matters that should be reviewed by law firms that focus on business formation.

In the end, the benefits of incorporation will almost always outweigh informal business operations. To learn more about incorporation, be sure to seek the counsel of a business formation attorney.

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