If you are thinking about starting a business you may ask the question, why incorporate? There are many advantages to incorporating your company, but it is down to individual preference as to whether you wish to go through with it or not.
The first advantage of incorporating a business is the reduction in taxes that you will have to pay. Generally the tax rate is lower than an individual tax rate and the corporation is taxed separately from their owners. It may be that your company has to be earning a specific amount before it benefits from a lower tax rate, which is something to bear in mind.
Businesses that are incorporated also have better access to Capital. They can generally borrow money from banks and other financial institutions at a lower rate. This is because it is deemed as less of a risk that loaning money to other kinds of businesses. Corporations also have the advantage of being able to raise money more easily than other types of businesses, which have to rely completely on their own money.
A corporation’s shareholders can also benefit from this process. Liability is limited in a corporation so shareholders are not held responsible for things such as the company’s debts. The investment that they made when the company was formed is protected and they cannot be sued by Creditors if the business should go bankrupt.
Still asking the question, “why incorporate?” Another advantage of incorporating means that the company has greater stability than that of say, partnerships and sole proprietorships. Should the owners, directors and shareholders of an incorporated company die, the business will not cease to exist as it does with these other forms of businesses. This is because the ownership of the company is not dissolved, it is passed on to the heirs of the owners, shareholders etc. The ownership transfer of a corporation is also a very easy process.
If the process of incorporating your business puts you off, then it is possible to purchase ready made companies. There are several providers who specialize in preparing ready made companies for sale. This will take the hassle out of having to incorporate a business as it is all done for you; you simply have to complete the ownership transfer process with the supplier.
Choosing a ready made company with a history may be of benefit to you. The older a company, is the more prestigious it will appear to be. The companies are already registered saving you time and money. The cost of these ready made companies will vary depending on several factors.
This information should help you reflect on the question, “why incorporate?” Making the decision to incorporate your company should not be taken lightly and all pros and cons should be explored before deciding completely. If you need some more information, typing ” why incorporate ” will bring up an abundance of information for you to read in order to make that life changing decision.