Three Reasons You Should Incorporate Your Small Business

If you are thinking about starting your own business, you need to consider what form your business will take. It is common for a new business to simply be in the form of a sole proprietorship or sometimes a partnership, but a small business can incorporate in a similar fashion to the way large businesses do. The following are three good reasons you should consider doing this.

Your personal assets are protected

This is perhaps the single greatest advantage of incorporating your small business. When you form a corporation, your business is separate from your personal wealth, and this gives you two advantages. One, if your business were to fail and you have to file for bankruptcy, then only the assets of the corporation can be used to satisfy debts. Your personal assets go untouched. The second advantage is that if your company is ever sued, it is only the assets of the business that can be used to satisfy a judgment, if you were to lose in court. Granted, you are likely to have liability insurance, but these policies usually have monetary limits. Your personal assets can be at risk with a sole proprietorship. The protection afforded to your personal wealth makes incorporating your business attractive.

You can remain anonymous

There are many reasons you may not want to have your name associated with a business. Often a business can become profitable, but it is in a much different area than the professional work you are normally associated with. But whatever the case may be, you are less likely to be known as the owner when your business is incorporated. A sole proprietorship, even without your name on the sign, is a matter of public record. 

It can be easier to raise capital

If your business is in need of a cash injection to expand your operation, you have the option of selling shares of the corporation. This is one extra option that other legal forms of business do not have. Often investors like the idea of buying shares because they become part owners of a company. They will also have rights as shareholders. This is much different than buying a minority interest in a sole proprietorship because all this does is create a partnership. An investor can sell their shares to other investors if they wish, and the process is straightforward.

There are many good reasons to incorporate your small business, and those listed above are only a few. However, the business laws in the area of incorporation can be complex, and they vary from one state to another. It is imperative that you use an attorney to incorporate your small business. Contact a law firm such as Souders Law Group for more information.