Incorporation of your business will offer you some benefits including some of the following:
- A potential for tax savings and the benefit of deferring taxable income?
- Limited liability protection against creditors.
- It may be easier to raise capital through investors.
- Potential for a better exit strategy.
There are some factors to consider with establishing a corporation:
- More costly set up and record keeping costs such as incorporation fees, corporate tax filings, corporate maintenance.
- Decision making can become more shared as shareholders are added.
The question of should I incorporate, really becomes, Is Incorporation right for my business?
Factors to consider also include:
- Risk of lawsuits in your business
- Anticipated revenues and expenses of the business
- Hobby business vs. full time commitment
- Asset and equipment purchase needs.
- Active vs. passive income for tax purposes.
- Will your business be able to benefit from tax savings?
This is a very important decision to make and it is best to have a discussion with a tax professional to determine if a corporation is a good fit for your needs.