Great question from Facebook. What are the pros and cons of incorporating?

By Shannon Stahlin, CEO, Direct Incorporation

One of our Facebook friends posted a great question on the Direct Incorporation page this week asking whether she should incorporate her business.

Here’s her question:

“ So – I write a blog but have not done anything about actually registering a business name or incorporating. I make a little money through advertising, not a lot. Should I make things formal? Wondering about pros and cons, especially cost-benefit tradeoff.”
– Erika Kerekes, who writes the food blog In Erika’s Kitchen

Here’s my answer:

“That’s definitely a great question and I’m happy offer some help. (Read our disclaimer and keep in mind that we are not a law firm and cannot offer legal advice.) There are definitely benefits to incorporating a business that is generating any amount of revenue.

One needs to balance the benefits with the cost. Not just the cost of incorporating but the cost to keep the LLC/Corp going – particularly, more administrative work and annual fees. The annual fees vary by state. For example, the annual fee is just $15 in Michigan, but $800 in CAL. Which state are you in Erika? As for the administrative work, we have a program to simplify and assist you with “corporate formalities” and deadlines: We make it pretty easy for our clients to knock down these requirements.

On the other hand, there are numerous benefits to incorporating or forming an LLC, but there’s a few that stand out. To start, there can be tax benefits, sometimes significant, depending on your choice of entity. You will also legitimize your operation with an official corporate name – In Erika’s Kitchen, LLC. The name also gets locked in with the state, so no other entity can apply for that particular name, which can also kick-start potential trademark rights in the name.

Another key benefit is the liability protection that an entity offers. The general rule is that if the business is ever sued, you can collect against the business, not the owners of the business. Peace of mind for any business, don’t you think?”
– Shannon

We love hearing from clients on our Facebook page. If you have questions, please don’t hesitate to post them on Facebook or right here on our blog. I’ll do my best to answer them. Thanks. – Shannon

Protect yourself. 5 sound reasons to incorporate your business.

By Shannon Stahlin, CEO, Direct Incorporation

Don’t take a wrong turn when starting your journey as a business owner. To properly protect yourself and your assets, you must incorporate your business. Whether you’re a Limited Liability Company, an S-Corporation, or a C-Corporation, incorporating your business offers you the following benefits:

1. Protect your personal assets. When you incorporate your business, you’re essentially forming a separate legal entity. This means you are limiting your personal liability should there be a lawsuit filed against your business.

2. Lower your taxes. When you incorporate your business, there are tax deductions for a wide variety of operating costs, which will substantially cut back your company’s overall tax liability. These deductions may include the cost of materials, employee wages, the cost of insurance, the cost of retirement plans, as well as business travel and entertainment expenses.

3. Raise your capital. A corporation can raise capital from investors easily through the sale of stock, while a sole proprietor cannot.

4. Leave a legacy. The life of a corporation is not dependent on the life of a particular individual. It can continue indefinitely and is not affected by the death or withdrawal of shareholders, directors or officers of your corporation.

5. Enhance your image. Another essential reason to incorporate your business is that it adds credibility to your operation. The perception of a business is improved by its incorporation and use of “Inc.,” “Co.,” or “LLC” following the name of the business. Customers are more likely to trust and deal with a business that has this positive image. More importantly, your business will be more attractive to banks and investors if and when you seek outside financing.

Do you have questions about incorporating? Please leave a comment below and I will try to answer them. Thanks! – Shannon