Companies and businesses that have been incorporated have always experienced tremendous benefits. This is a fundamental way to separate your business life from your personal life. This article pinpoints the tremendous advantages of incorporating your company.
To begin with, company incorporation promotes business longevity. In this life, you will always have a limited lifespan and a time will come for you to depart from this life. Therefore, you need to avoid having a sole proprietorship and incorporate your business. This will help avail a succession plan and your business will live long for years, decades and even centuries after your death.
The second advantage is the limited liability. The moment you separate your business from your personal life is the moment you embrace and benefit from limited liability. In other words, you will never be responsible or liable for any company’s debts whatsoever. Your personal life will always remain intact even when your company is sued or is having debts leading to the filing of bankruptcy.
The tax rates for incorporated businesses are always lower. You will not be subjected to full tax rates like a sole proprietor. Nonetheless, when you have incorporated your company and business, you are always allowed to pay a lower tax rate annually.
This is a golden chance for you to benefit from tax deferrals. Whenever you have an incorporated company, you are always taxed on your income and nothing more. In other words, anything that is not part of your income is not taxed. Thus, you could have an option of avoiding taking your income from the company and this will help you avoid being taxed. This is very different when compared to the sole proprietorship as they will have to file taxes for all the profits.
There is no way you will have to pay taxes when you have incurred losses. Businesses like sole proprietorship will never have a chance to carry their losses forward to another fiscal year. However, with an incorporated business, your losses will be scattered and carried forward to the other years.
Incorporated companies have multiple payment options. For example, you are the one to decide whether your stakeholders are to be paid as salaries or dividends. Each will have its tax advantages. Where you have hired family members, you could have their salary filed as company expenses. Alternatively, you could decide to receive your salaries as dividends which are lowly taxed.
The list of the advantages that incorporating your company brings is endless. The above are just a few of the benefits. Thus, you are to make up your mind and make plans for incorporating your business where you eye to experience the above benefits.