Incorporating – Is it what’s best for your business?
At Apex Accounting, our team is often asked, “Should I incorporate my business?” Unfortunately, there is no definitive right or wrong answer, and the results depend on each individual’s specific situation.
Incorporating your business can be beneficial in many ways which can vary from one business to another. The most common advantage of incorporating a business is the potential for tax savings.
When it makes sense to incorporate:
- If the business is going to incur a significant amount of debt for equipment, inventory, property, etc., there can be substantial savings if the business is incorporated
- If the business owner intends to reinvest the profits from within the business to finance future growth
- If the business is generating more profits than the individual owners require for their day to day living
- If the owner wants some potential protection regarding the limited liability of a corporation and their personal assets not being liable for claims by creditors or lawsuits (legal advice should be sought by the business owner to discuss this)
How to incorporate:
The actual process of incorporating is not a difficult one and is completed in consultation with an accountant and a corporate lawyer.
The primary disadvantages include the additional cost to incorporate, increased annual accounting and legal fees for the business, and additional complexity for the business owner. Because of these disadvantages we only recommend incorporating if the other savings will offset them.
If you would like more information on whether incorporating would benefit your business, please contact one of our CPAs in Cranbrook or Creston.