Business incorporation is a major step to give your company a solid legal grounding and foundation for growth. Whether as a new startup or as a long time operating business, the benefits of business incorporation cannot be overemphasized. Incorporation does not only protect you from liability, it also gives room for alternative taxation scheme.
This article is not for the benefits of incorporation, it is to explain the best tie for you to incorporate your business.
People keep asking the best time to incorporate a business, the first answer is to incorporate before starting a business if you are hiring staff or getting loans, credits from other sources that is not your personal piggy bank. If you are already in the business, the best time is to incorporate at the end of the year or when you hire your first employee.
Here is a detailed explanation if you are yet to launch your business
Incorporating before business launch may not be the best fit for everyone, as cost of incorporation, taxes and other out of pocket expenses may be high and chances are that on the first year of operations you will be contributing more to the new business personally, than what you will be getting out of it.
If you file your taxes as a self-employed you still get to enjoy to claim all the expenses as you will do when you incorporate, if you have some losses and then you close your business, it will be best to keep those loses on the personal side. If your incorporated business failed and you shut down the business then your losses are also gone with it.
The benefits of Incorporating your business are that your personal assets are protected from liabilities and if you have extra income you can enjoy some tax deferral by dividends and management bonus declaration.
Incorporating your business means you have other tasks to handle, so they can be added to your business checklist right from the start. Once the incorporation paperwork is approved, your business a new legal entity and you are the shareholder of it.
Having a business bank account separates business transactions from your personal transaction and your line of credits and credit cards are owned by your corporation and not by yourself.
If you are in the business
You may have been running your business for a while and you feel it’s the right time to convert your business into a smarter business structure. It is one of the best ideas you have taken because the benefits attached are in favor of your tax.
The best time to incorporate your business is the end of the year. Here are few reasons to convince your new corporation should go into effect at the beginning of the New Year;
- You have eased yourself the stress of doing it during the year
- You are starting the New Year with your business protected
- You will only be filing one set of tax form for the year
Incorporating your business any other time during the year means you will be filing two tax forms for your business; one for the period when the business was a sole proprietorship and another for the period when you’re the business is a corporation. Nobody will like to file twice or pay to file tax twice.
If you are thinking the time has come for you to incorporate your business and like to find out more, get in touch!