• RSS Feed

  • Free Skype Call

    Skype Me™!
  • Twitter

    NZbizadvice on Twitter
  • Testimonials

    "Mark has been working with me since May 2004 on many aspects of my business.

    He is very approachable & offers me practical advice and his communication skills are excellent. I would have to say Mark gives his all and is determined to help his clients succeed".

    Owner, Small Pet Shop

    "Mark Gwilliam and his team at Business Advisory Accounting & Tax Services has been my full service accounting department for many years for my companies.

    I rely on the fast, friendly and accurate information they provide me to analyse and concentrate on running my business. Any information that I need is readily available. To eliminate the costs and hassles of in-house accounting, I highly recommend Mark's team."

    Owner, Medium sized building business
  • Recommended business products

    Domain Registrations starting at $9.98* Stock Photos, Royalty Free Stock Photography, Photo Search

Incorporating Your Business: Is This the Right Move?

Whether you run a small business from your kitchen all by your lonesome or you have an office somewhere else with a couple of people working for you, getting your business incorporated could be your wisest business decision yet as incorporation can protect your business and assets. If you doubt this little piece of wisdom, ask your accountant (if you have one) or a financial advisor. Ask other businessmen like you, if you want. You’ll be sure to get the same answer.

Should You Go for It?

Generally, the answer is yes.

Incorporating is still the way to go if you want to protect your personal assets from creditors. Your corporation will be the only one liable to creditors should your business go bankrupt or should one of your clients sue your company for whatever legal reason.

If you are the sole owner of your business, you will be held accountable for all payables, debts, loans, and financial obligations that your business has incurred. Hence, your personal assets or savings are at stake in a sole proprietorship or a simple partnership business structure. That is, when your business goes bust, you (and your partner, if you have one) go bust along with it.

If you incorporate, however, your liability technically becomes limited to those assets and monies that you have invested in your business – no more and no less. Your business loans are payable by your business, not by yourself. Thus, if a time comes when you are no longer able to sustain payments to your business loans, your corporation’s assets may be liquidated to come up with the payments, but assets that you personally own will be left alone.

If you incorporate, moreover, your company’s tax obligations are payable by your company, not by yourself. Although this may seem mere splitting hairs to you, there really is a great advantage to separating your business dues from personal ones. For one, corporations generally get levied lower taxes. For another, corporations usually enjoy tax exemptions in select countries and states. An accountant can explain to you in great detail how this works. At this point however, suffice it to say that through incorporation, you could enjoy a substantial amount of tax savings.

Incorporation also endows you with the capacity and the flexibility to respond to sudden economic downturns and financial emergencies. Corporations can sell stocks to raise capital. Aside from this, banks are generally more amenable to lending money to corporations than to businesses that have other structures. Corporations are actually perceived to be more stable (and thus much better risks) since they can exist even when the major shareholders die; shares of corporations are expected to get passed on –inherited or sold – whereas family-owned businesses have a much greater chance of failing when the original proprietor passes away.

Indeed, incorporation is usually the right move for the entrepreneur who wants to survive and succeed. However, know that you may not have as much control in a corporation as you have in a sole proprietorship or a simple partnership. Thus, if you want to call all the shots, then perhaps incorporation is not the right move for you.

Add a comment