Incorporating your business is quite possibly the most helpful (and inexpensive) thing you can do to prevent your assets. If you’re going the sole proprietorship route, we think you’ll quickly change your tune in about five minutes time. Here we go.
If your business or startup becomes the next Twitter, you’ll probably have a hundred offers a day flying in, where some exquisite billionaire wants to purchase your brand and integrate it into his own.
Okay, so that’s the best case scenario. Let’s get real for a moment.
When you incorporate your business, you can sell it as an entity, which you can’t do with a sole proprietorship. When you exit the business, or when your time comes, that entity dies out. You can’t pass a sole proprietorship onto your children or spouse, but you can put them in line to run My Family Business, Inc.
Let’s be straightforward here: how a business looks matters, both physically and on paper. When you see Inc. at the end of a business title, that gives you the immediate impression that they went the legal route and actually turned their business into something. It validates your business in a world full of competition, and persnickety potential clients.
When you’re running a sole proprietorship, it all falls down on you. With an incorporated business, you’re taking the heat off of your personal interests. You’re separating your personal section from the business section, much like you would with an LLC. For example, if an incident happened at your physical business location, and someone was given the option to sue you, they’re suing My Family Business, Inc., not your personal income. (Well, it could be crippling either way, but you do want to ensure your cut of the spoils are secured.)
Little do you know, there’s a whole bunch of stipulations that come into play when trying to write-off receipts for printer paper, that new office chair, and all of the above. That is, when you’re a sole proprietorship. When you’re an incorporated business, there’s more tax flexibility, including write-offs of receipts and expenses. Utilizing this can save your skin come tax time.
If you’re rocking a freelance gig or a side business, (typically, when your income is primarily through a nine-to-five job,) then incorporating your business might not be for you. If there’s little to worry about, then feel free to ride that ship as long as you can. If you want to actually protect yourself, consider incorporation.