There are many different types of business entities that you can set up if you have started your own business. Some include: Limited Liability Corporations, C-Corp and an S-Corp. Regardless of which formation you decide is best for you, there are advantages in forming an entity. More on the different types of Corporations later.
Personal Asset Protection
This is a biggie! This is probably the main reason anyone starts a corporation. If you get sued, or the business just tanks, you are not liable for the losses. Meaning your personal funds are not at risk. This allows your personal affairs to be separate from the companies. This leaves you free and clear from any debts or claims incurred by the company.
Professional Appearance
The appearance of Inc. or LLC after your business name can add authority and convey an image of seriousness and dependability. This will make a potential customer feel comfortable in doing business with you. Plus this will make you feel special too. There is something to be said for owning your own business. If you can put LLC or Inc. at the end of your business name, it makes you special(or at least feel special).
Name Protection
In the majority of states, no other business can form a Corporation or LLC using the same name of your Corporation or LLC. That means if you start up a business called Widgets-R-Us, no one can do business under that same name. This is good protection to have incase someone with a big wallet tries to steal your business model and customers.
Deductions
Normal business expenses can be used as deductions from the profits of the company allowing for a decrease in taxes. You can actually claim deductions if you are just a sole proprietor as long as you are not doing it as a hobby, which can sometimes be hard to prove. If you are incorporated, you are obviously a business.
Remember, I am no tax pro, so if you plan on starting your own business you should probably see a professional to verify the facts. It may cost a few hundred bucks to go from sole proprietor to corporation but the peace of mind from these benefits probably makes it worth it.
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April 18th, 2009 at 1:21 pm
I was an owner of a corporation for ten years along with my partner. We were not LLC, just INC. The business fell to hard times due to the economy and the health of my business partner.
We had incurred a credit card debt of $1,200 which we were trying to pay for a year after we dissolved the corp. It has gone into default and Capitol One says my partner is personally liable for the bill since she set up the account, and her personal credit rating is being affected.
Do you have any advice? I personally believe we have no liability since we were incorporated.
Please Help!
April 11th, 2010 at 10:50 pm
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