Fri 23 Oct 2015 | By:

7 (No-Brainer) Reasons to Incorporate a Business

Why Incorporate a Business

Let’s be honest with one another, the very fact you’re looking for reasons to incorporate a business (probably yours) means you skipped a few important small-biz classes.

Am I right? You party animal you…

Starting a brand new business is exciting and at the same time nerve-wracking once you reach the point it’s either “#@$% or get off the pot!” Are you going to make this thing official or not? And for those hardcore anti-establishment folks out there, sure that lasts a while but with success comes the necessity to PROTECT that success.

And listen snowflake, 90% of the entrepreneurs out there right now will put off the incorporation process way too long because they mistakenly think or assume it’s a very complex and expensive process. Which, well, it can be, but doesn’t have to be. Not anymore.

But no one blames you for the indecision. It’s a very big step and inexplicably you’re not sold on the idea yet. Aside from suggesting you watch a few seasons of Shark Tank, here’s 7 no-brainer reasons to incorporate a business.

 

Reason #1: Increased Legal Protection

Without incorporating, you’re putting yourself (and your family if you have one) at risk of lawsuits and allowing creditors to reach personal assets if someone sues or trouble arises. After incorporating, in the eyes of the law your business becomes a separate entity with its own legal rights and transactions.

These days, just as it’s always been, business people need to safeguard themselves and their personal assets so they don’t end up broke or worse.

Once incorporated a business becomes a human being in the eyes of the law. It becomes separate from you so if anything goes wrong, personal assets such as your house, car, personal savings, etc., won’t be seized by creditors. Your company gets sued, not you.

 

Reason #2: It Dramatically Improved Brand Image

Both Wall Street-style and Main Street credibility with average consumers of all kinds. Once incorporated, perceived value levels shoot upwards. We consumers immediately believe you’re a more legitimate operation, officially recognized by state and federal government agencies to conduct business.

And how is that message conveyed? Through the abbreviation of your legal structure after your brand name: Inc., LLC, and Co. are common examples.

 

Reason #3: Increased Access to Funding

Incorporating a business means having direct permission on the state/federal levels to operate. Because of this fact investors, venture capitalists, and banks are, shall we say “encouraged” to engage in a relationship with you and your company.

Same thing goes for crowdfunding when you think about it. Trust and legitimacy are very important when you do business and incorporating your business will definitely help in those departments.

 

Reason #4: Perpetual Existence

One of the biggest advantages when you incorporate a business is you’re then able to establish what’s known as perpetual existence. This is defined as follows:

In company law, perpetual succession is the continuation of a corporation’s or other organization’s existence despite the death, bankruptcy, insanity, change in membership or an exit from the business of any owner or member, or any transfer of stock, etc.”

Make sense? Tons of entrepreneurs consider their companies as entities they can pass on to their family. Once incorporated this protection can be put in place. In connection to this benefit…

 

Reason #5: Hassle-Free Transfer of Ownership

A major problem unincorporated businesses encounter is the difficulty in the transfer of ownership. Partners, family, friends, shareholders can easily get in the way of a speedy transfer. Right? Whoa! By incorporating a business, transfer of ownership is a lot easier and faster for everyone involved.

 

Reason #6: The Tax Benefits

We could fill this section with many books’ worth of content. When it comes to taxes there are benefits and disadvantages to incorporating depending on the structure you choose. Overall though, in a general sense, incorporated businesses enjoy a much cleaner and leaner tax situation than their unincorporated counterparts. Talk to a tax professional to get the facts.

Incorporating your business can save you a lot of money! An incorporated business has many tax deductions that come from operational costs including employee salary and benefits, production costs, advertising costs and many others.

 

Reason #7: Organizational Hierarchy is Clearly Defined

Incorporated businesses follow a well-defined organizational hierarchy, where every position has a clear description and scope. Authority is passed from the Shareholders, to the Board of Directors and to designated company officials. Decisions are not manipulated but are fairly discussed by all concerned parties.

Unincorporated companies don’t have this structure and important calls can be manipulated and made by someone other than the owner/partners. Abuse of power and disruption of company operations are likely to occur.

 

ONLINE INCORPORATION VS HIRING A LAWYER

Wrapping Up and Funding a Business

If you have a good business lawyer in your pocket who owes you a big favor, or you happen to be a lawyer yourself then great!

Otherwise it all comes down to money. Online incorporation providers like IncFile do everything you don’t technically need a lawyer to do, but keep in mind they aren’t a legal office. They’re a for-profit company.

But IncFile is just the most popular option, there are others (competitors) who also offer affordable package options for entrepreneurs.

Ready to Get Started?

Thankfully we're in the 21st century and you can take advantage of an online incorporation service like IncFile.

From free Registered Agent service, order tracking, free shipping, and one-business-day processing they're the #1 choice of countless businesses and entrepreneurs today (especially if you're on a budget!).

IncFile.com Or IncFile Review

About Ryan James

Half hardworking hermit, half avid adventurer, Ryan founded Startup Savant to simplify entrepreneurship and pay it forward by donating a portion of all revenue to support children's education via DonorsChoose.org.

Our Most Popular Resource Reviews

  • LegalZoom LLC Review
  • LivePlan Review
  • Wix Review
  • Spark Business Review
  • Bank of America Review
  • Xero Review