If you are running your company as a sole proprietor, you should consider incorporating as soon as possible. When you incorporate, you make it easier to find customers, avoid personal liability in a lawsuit and gain several tax advantages compared to being a sole proprietor.
Gain New Clients With Ease
Clients tend to trust a company more if it is incorporated. This is because a business that is incorporated is planning to be around for the long haul. It also shows that you are a sophisticated business owner who takes running and growing the company seriously.
Avoid Liability In A Lawsuit
Let’s say that you were using a credit card processing company that was not PCI compliant. As a result of your merchant accounts not being as secure as they should have been, a customer had his information stolen while transmitting an online order through your website. If you are a sole proprietor, you could lose your house, car and life savings due to the error of your credit card processing service. By incorporating your company, the customer would be limited to collecting company assets.
What Are The Tax Advantages Of Incorporating?
Corporations can deduct the entire cost of health insurance, create a qualified retirement plan for its employees and are audited at a lower rate than a sole proprietorship. While you can deduct the cost of health insurance as a sole proprietor, you still have to pay self-employment tax on that money.
Getting A Merchant Account Can Be Easier As Well
Merchant accounts are easier to get when your company is incorporated. This is because the business is a separate entity that be independently evaluated by a merchant services company. If your business has no credit or bad credit, it will not stop you from getting a loan. However, your company should be making at least $5,000 or more per month in credit card receipts.
Your small business should incorporate if it hopes to grow in the future. Gaining clients is easier, getting business capital is easier and there are tax advantages to becoming a corporation. All of these things help increase sales while lowering the cost of doing business for your fledgling company.