Benefits of Incorporating Your Business
The Benefits of Incorporating Your Business – When exploring options for the structure of your business, you’ll have to make a choice between having a sole proprietorship or an incorporated company. While the initial cost of incorporating can be slightly higher than sole proprietorship, the long term benefits for your business far outweigh the cost.
Boost your Business Image
Being incorporated can give an image of professionalism that sole proprietorship can’t. It allows your company to be viewed by potential investors more favourably, giving you opportunities to grow and expand. Having Ltd., Inc., or Corp., as a part of your business name can be perceived as more professional and give a more established image. Some businesses will only work with other companies that are Incorporated because it prevents liability issues and makes transactions less complicated. Banks also look favourably upon corporations, giving easier access to financing and often give lower rates for loans.
One major advantage of incorporating your business is limited liability. When operating a sole proprietorship, your personal assets can be seized to satisfy the debts of your business, which means you could lose your car, home, or savings in the event that your business is sued.
Being incorporated means that you cannot personally be held liable for the debts incurred by the corporation, with the exception of circumstances that you’ve given a personal guarantee.
Corporations have an unlimited lifespan, where sole proprietorships cease to exist when the owner dies or leaves the business. This means that in the event you want to sell your business, it makes the process much easier and allows for the exchange of ownership without major complications.
Income and Tax Benefits
When you incorporate your business, you can decide how your income will be dispensed and when. This gives you the ability to take your income out at at time that you’ll pay less tax, or you can choose to receive dividends from the business, which will also reduce tax amounts.
Business tax rates are much lower than personal tax rates, so leaving money in the business until a later date when you will pay less tax can be a huge benefit.
Business Name Benefits
Sole proprietorships have no business name protection, meaning anyone else can start a business under the same name, complicating your businesses online presence and possibly having your business confused with others. This could be particularly unfavourable in the event that the other business has a poor reputation and customers confuse the two. When you incorporate provincially, your business name is reserved and cannot be used by anyone else in the province. However, incorporating federally allows you to use your business name throughout the country.
If you’re ready to reap the financial benefits and growth opportunities that come with incorporating your business, Pathfinder Law is here to help you navigate through the necessary steps. Contact us at 604-850-4685 to set up a consultation today.