Why You Should Incorporate
Conventional wisdom tells us that we do not need to improve things that are not broken. Many people apply this wisdom improperly to the state of their small businesses. Even if you do not think you need to take the additional step to formally incorporate your general partnership or sole proprietorship because you have been successful so far or satisfied with your business’ performance, there are so many reasons why you should. An experienced attorney can provide legal advice regarding how to incorporate your business.
Why Should You Incorporate?
Incorporating your business may sound like unnecessary trouble; however, the following includes certain reasons that could cause any business owner to rethink their decision not to incorporate their business.
- Tax Advantages. Because Florida does not have a state individual income tax, your business already avoids a double taxation problem; however, S corporations are also exempt from state taxation. The business tax landscape in Florida, especially for software businesses and S corporations, can be particular helpful to businesses. Florida provides tax exemption for software sales between business software users and software retailers; an exemption that can save your software business a lot of money.
- Personal Asset Protection. One of the most frightening realities of failing to incorporate your business lies in the fact that you can be personally liable for your business’ faults. If a customer sues your business and receives an award from a jury, you can also be held personally responsible for payment if the business is unable to pay the bill. This means that your family’s livelihood and your savings can all be jeopardized by one incident involving your business.
- Perpetuity. If you incorporate your business, it makes it easier to ensure that the legacy you leave with your entrepreneurial efforts does not die when you do.
- Raising Capital. If you incorporate, some business structures will allow you to see great growth by selling shares to raise capital, an option not available for businesses that are not incorporated.
Types of Corporations
Now that we have discussed why you should consider incorporating, here are some of the options you have when considering how to incorporate. While the names and structures differ, there are different taxing consequences for each type, and you may want to discuss which structure is best for your business with an experienced attorney by comparing details of the drawbacks and benefits of each business structure.
- LLC. A limited liability company does not have a residency requirement like other types and is more simplistic, a benefit that allows for more structure flexibility than other business structure options.
- S Corporation. An S corporation will eliminate the common problem of double taxation and provide more investment opportunities, and only requires you to file taxes once annually.
- C Corporation. A C corporation allows you to experience truly unlimited growth opportunities because you would be able to sell stock, you would have no limit on how many shareholders your business can have, and would be able to deduct your business expenses.
Even if you previously thought that incorporating your business would be too costly or time consuming, nothing could replace the peace of mind you have knowing that your personal assets and your business itself are all as safe as possible. Our West Palm Beach business litigation attorneys at Pike & Lustig, LLP can help you ensure that your Florida business is properly incorporated. Contact us immediately for help incorporating your business.