Is Business Incorporation Right For Your Business?

Is Business Incorporation Right For Your Business?
If you're trying to decide whether or not Business
Incorporation is the right avenue for your business, you
should consider the following points.

When you incorporate your business, you're legally
separating it from yourself and officially giving it a
separate legal identity.

Before incorporation, you as the owner of the business,
personally own the assets of the business. But, far more
importantly, you are also personally responsible for its
debts and liabilities. This means that if your business
fails, your own personal assets are at risk!

Therefore it may be a significant benefit to you, if you
decide to incorporate your business as you will protect
your personal property and assets.

After becoming incorporated, you will only be personally
liable for amounts owed by the business up to the amount
you have invested in the business.

Beyond your invested capital, you will have no further
personal liability for the settlement of debts owed to your
business's creditors, unless of course, you have signed
separate personal guarantees for any specific loans or
debts.

Personal guarantees may be necessary where your business
has little trading history, or where your balance sheet is
not robust enough to provide sufficient guarantees to
lenders.

There is also another benefit of incorporation. The flip
side of the above personal protection from your business's
debts, is your business will also be isolated from any
personal financial problems you incur in your private live.

You should also be aware that, should for any reason your
incorporated business cease to trade, all of its creditors
and liabilities must be paid before you receive any of your
invested capital back. Basically, in times of trouble,
shareholders are always the last in line for repayment.

Your decision to incorporate your business is a very
important one, particularly if you're expecting to expand
your business in the future. Incorporated companies will
often find it easier to raise new capital required for
expansion from financial institutions.

Incorporating your business sends a message to the
financial world that your business will be around for the
long term, and that feeling of security makes it easier to
find additional finance.

Becoming incorporated also allows you to transfer ownership
of your business easily. Separation of the business's
assets and liabilities from your personal assets makes it
easier to value your business. Becoming incorporated also
eases the introduction of retirement plans and insurance
schemes.

Once incorporated, your company is governed by its Board of
Directors. The Directors are elected by the shareholders,
who then act as agents of the company on behalf of the
shareholders.

Finally, business tax rates are much lower than personal
tax rates. There are some issues of double taxation to
consider though. Whilst there may be tax benefits, there
will be some additional legal costs and administration
costs associated with being an incorporated company to
consider.

To learn more about the benefits and disadvantages of
incorporation, click on the link below to read more.

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Richard Taylor MBA is a Chartered Management Accountant and
Company Director with a specific interest in small business
start ups. Click on the following link to learn more about
the pros and cons of becoming incorporated.
http://www.incorporate-my-business.com