Why Should I Incorporate My Business?

2007-03-08 10:33:40

( Business )



If you are reading this article, the foremost question in your mind is probably “why should I incorporate my business?” You would be justified in asking this question, since incorporation is a potentially difficult and costly task. However, not incorporating your business may possibly be even more costly in the long run.

If you are serious about building your business to its full potential, you should consider incorporating it. You may not be aware of it, but keeping your business in single-proprietorship or partnership forms is actually quite risky. If the business fails, for instance, it is more than likely that you will fall heavily into debt. If your business was configured as a single-proprietorship or partnership, the liabilities will extend to you and your partners, if any. This means that your creditors will have the right to come knocking at your door and collect payment for the debt your business incurred. In fact, they can sell off your assets if necessary.

If you incorporate your business, on the other hand, this problem will not exist. The main advantage of incorporation is that you will limit your liability. This outcome alone answers the question “should I incorporate my business?” more than adequately. Limited liability will afford you a level of security that is otherwise not available in the business world. What you really should think about is not whether you should incorporate or not, but what type of corporation you would like to have.

Incorporation makes your business a separate legal entity. In other words, in the eyes of the law, the corporation is something quite separate from you, and it can act and be acted upon like all other entities. The corporation earns money, it pays taxes, and it can sue and be sued. If the corporation fails and it goes into debt, creditors can only run after the company’s assets, but you will be legally safe. That means that no one will have the right to sell your car just to pay off a bad loan.

To the question, “why should I incorporate my business?” many answers can be given, but the advantage of having limited liability should be more than sufficient. If you incorporate your business, you are shielding yourself from potential disaster. You owe it to yourself and your family to take advantage of such an opportunity.


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