Before going in for business incorporation, you have to decide the type of corporation you need for your business. There are many different types of incorporation for your business. Ideally, filing a ‘C’ corporation can deliver all benefits of business incorporation. Additionally, an ‘S’ subchapter corporation can help you receive your earnings from business into the bracket of your personal income. You however have to meet reasonable compensation standards.
Alternatively, choose limited liability company type of business incorporation. You can enjoy the elasticity and tax relief of a partnership with benefits of a limited company. The only drawback in limited liability company incorporation is the elaborate process of forming and setting up of your business. You have to file necessary documents for incorporating of your business after finalizing the type of business.
With so many people leaving the corporate world to go out on their own, many of them ask “why should I incorporate my business?” The costs associated with incorporation or LLC might make it seem like you need to be highly successful before considering taking this important step. Sometimes learning from other’s experience can be important when making these types of decisions.
One important consideration is the cash flow of the business. Once a business is netting greater than $60,000, incorporation makes a great deal of sense. One benefit of incorporation is tax savings. The tax savings are significant and some business owners will see a 50% reduction in their tax liability. Some of the savings are in self-employment taxes that business owners pay. Imagine being able to reinvest thousands of dollars each year back into the business. That is every small business owner’s dream!