Few entrepreneurs launch their small business as an incorporated entity. That’s fine while you’re just getting started, but a year or two down the road it’s often wise to incorporate. Here are some reasons you may want to consider incorporating your growing business.
Protect your personal assets from creditors. When you operate your business within a corporation, creditors are often limited to corporate assets to satisfy a debt. Your home, savings, and retirement accounts are no longer fair game.
Provide a personal liability firewall. The corporate form can help protect you against claims made by others for injuries or losses arising from actions of your business.
Issue shares of stock. You can help build your business by issuing shares to new investors, or by offering stock options to key employees as a form of compensation.
Gain tax flexibility. A corporation can provide you with more tax flexibility. Deliberate planning can help optimize the taxable division between corporate income, dividends, and your personal wages.
Enhance your business presence. Being incorporated sends a signal that your business is a serious enterprise and it could open doors to opportunities not offered to sole proprietors. Consumers, vendors, and other businesses often prefer to do business with incorporated companies.
If you are still going over the pros and cons of incorporating your business, pick up the phone. Together, we can complete a thorough tax review that will help shed light on the impact such a move will have on your business situation.
Business plan. Outline who will own the business and what the legal form will be, your qualifications to run the business, the competitive market you face, the products or services you will sell and how you intend to advertise to prospective customers. How much cash will you need to start up and where will those funds come from?
Legal form. You can incorporate, or operate as an LLC, a partnership or a sole proprietorship. Consider both tax and non-tax reasons for selecting a given entity.
Location. If your business will consist only of online sales, your world headquarters can be wherever you are. However, if your business needs foot traffic to thrive, you’ll need to research rents and other costs such as utilities, as well as zoning and traffic restrictions.
Taxes. You’ll have to work with the IRS, state tax agencies and local governments to obtain permits and occupational licenses.
Advisors. Create a business financial team that includes a banker, an insurance agent, an attorney and an accountant. Involve your advisors early and frequently in order to gain the most value from their insights.
Need more suggestions for getting your business off to a good start? Contact us. We’re here to help.
Disasters, natural or otherwise, could ultimately lead to your company’s demise. Fortunately, advance planning can keep you on track to survive and thrive no matter what the future may hold. Here are seven scenarios to be prepared for.
A natural disaster. To paraphrase the old saying, you can talk about the weather, but there’s not much you can do about it – except have a plan in place in the event a natural disaster damages your business premises. Two tips: Maintain adequate insurance and store valuable business data at a secure off- site location.
A key employee quits. Cross-training can help you avoid business interruptions if a key employee leaves unexpectedly. You might also want to consider asking key employees to sign a reasonable non-compete agreement to protect confidential information. Typically, these agreements prohibit an employee from working for a competitor for a certain period.
An employee embezzles company funds. To safeguard your business assets, divide responsibilities so one person doesn’t have complete control over the books. Set up a system of checks and balances. But no matter how many internal controls you have in place, make sure to monitor cashflow and expenditures yourself on a regular basis.
Your biggest customer leaves. To keep your business from going under if you suddenly lose a major source of revenue, update your marketing plan, stay in touch with former customers, establish an emergency budget, and diversify your revenue stream.
You become disabled. “Key-person” disability insurance can provide funding to keep your business afloat if serious illness or accident strike the business owner. The policy may also cover employees who are vital to operations.
Your company or partnership splits up. Draft a buy-sell agreement to ensure a smooth transition due to the sale of a business interest, including a forced sale on the death of one of your shareholders or partners. The agreement can establish the terms of a buy-out and set a value for the respective business interests.
Your computer system crashes. Extra hardware, such as tablets or laptops, regular off-site backups, and cloud storage for important documents can avoid a crisis when your computer fails.
