There are 30.7 million small businesses in the United States. Each year, people embark on their dream of owning their own company, and this number grows. It’s an exciting and scary time as you venture into a new chapter in your life. To keep costs down, you start your business as a sole proprietor operating out of your home. However, as your business grows, you’ll soon realize that you need to make your company official by considering business incorporation.
Look out for these four signs to know when it’s time to incorporate.
1. You’re Ready to Grow Your Team
When most people start a business, they’re a one-man show. But as time goes on, the business grows. Before you know it, there aren’t enough hours in a day to do it all yourself. This is the time to start hiring help.
Before you take this next step, you should consider business incorporation. Changing this aspect of your business can provide you with an extra layer of personal protection. It will also make it significantly easier to process payroll, negotiate contractual agreements, and establish credibility.
2. You’re Moving to an Office
When you have a small business, you’re probably working out of your home with the help of friends and family. However, you’ll eventually outgrow your home and need to secure dedicated space for your business. It’s smart to incorporate before you make this move.
First, if anyone gets injured on the business premises, incorporating will protect your personal assets. You’ll also put the office lease and other agreements in the business name. This will help protect you from liability should the business struggle to fulfill these contractual obligations.
3. Your Profits Are Growing
When working as a sole proprietor or simply selling homemade items online, your business profits are your personal profits. This is treated as personal income for tax purposes. Now you’re paying taxes on your business profits through the personal income tax system.
When your profits reach a certain amount, it will become smarter to incorporate and have them assessed at the corporate rate. You’ll find that the rate is lower and be more beneficial in the long term.
4. You Are Looking for Investors
To be able to grow your business, you need to have the capital to fund it. You invest money to get it started and growing, then repay that investment with interest as the business becomes profitable. You could invest your own money, but you may not have enough capital.
If you plan to seek out investors, then you’ll need to show them that you’re a viable business. Incorporating will help you to meet the requirements for many investors and banks. It shows a level of commitment, seriousness, and professionalism.
5. You Need Better Benefits
If you’re single and only supporting yourself, then you can get by with minimal income and insurance. However, if you have a family to take care of, this isn’t possible. You need to be able to afford health insurance coverage for you, your spouse, and your children.
Incorporating your business means you can purchase insurance. Doing this lets you attribute this cost as an operating expense. This is a much smarter financial decision than paying out of your pocket.
To make the most of this, look for a plan that’s more expensive upfront to limit your out-of-pocket expenses when you use the insurance. This will also maximize your potential write-offs.
Consider Business Incorporation Today
If any of these situations sound familiar to you, then it may be time to consider incorporating your business. When you make the switch over, you’ll enjoy financial benefits both personally and through the business.
Contact our office today and let our experienced attorneys help you incorporate your business.
