January 17, 2024

5 Reasons Why Your Small Business Should Be Incorporated

Are you currently operating your own small business but have never thought of incorporating it before? This is usually the case for some entrepreneurs who don’t think that converting their small business to a corporate one is an important move.

As an entrepreneur who is just building your first small business, you might still try to figure out how to operate your company correctly, how to grow your sales, and what you can do to improve your company strategy. It is normal to get lost in the haze and try to put things like registering and incorporating your business in the back of your mind.

But today, we will uncover the best x reasons why you should promptly incorporate your small business to protect yourself and your company.

Provide Clarity Among Founders

If you establish your business together with another partner, it means you are not the only one who owns the business. Then, incorporating your small business right away after establishment can help give clarity to founders.

Incorporating your business can help to clarify who owns what and how much. In some businesses, you and your partner might own equal power and shares. However, in others, certain owners might have more control or money due to prior agreements. Although usually, at first, you and your partner will not pay much attention to shares, along the way, as your business grows, this will become an even more pressing matter. To prevent conflicts later, it’s better to incorporate your business early.

By incorporating your business, you and all of your partners will have official documents that outline each owner’s money and management duties.

Protecting Your Business Brand

When you incorporate your business, it means that your business will stand as a legal entity that has the legal right to protect its logo, catchy phrases, products it sells, and many other important things with trademarks and copyrights. This means you will be able to keep your brand from being used wrongly or without your permission. Simply put, incorporating your small business can help you protect your business brand – ensuring it can live up to its value.

Ownership Transfer is Easier

No one knows about what the future holds. Along the way, as you grow older – you might wish to transfer your business ownership to your children or other family members. If this is the case, then having your business incorporated first, can help you to easily transfer the ownership of your business without any worry.

Not only in case of ownership transfer to family members, you can also change ownership in a corporation through the sale of stocks. This can be helpful, especially if you want to bring in new investors to your company.

Better Access to Capital

As a corporation, your small business can raise capital much easier through the sale of stocks or issuing bonds. This can help you in funding growth, expanding your business scope, and allowing you to try new ventures.

On top of that, being an incorporated business will also add more credibility and transparency to your business. This will help you to have an easier time securing loans or lines of credit from financial institutions when compared to sole proprietors. Lenders might be cautious about providing loans to sole proprietors because oftentimes, sole proprietors have no clear separation between the owner’s assets and the business.

Simply said, an incorporated company can have better access to capital, as lenders often view the corporation as a more stable entity.

Better Tax Management

When you decide to incorporate your small business, you will gain flexibility in how you receive your income. This can aid in getting a better tax advantage. As a business owner, instead of drawing a regular salary from your company as it generates revenue, being incorporated allows you to strategize when to withdraw your earnings. The timing can be adjusted to periods when tax rates are lower, potentially reducing the overall tax burden on your income.

Moreover, as a shareholder in a corporation, you will also have the option to receive income in the form of cash dividends rather than wages. Dividends, when received, are often taxed at a lower rate than regular income. This can provide another avenue to optimize your tax obligation.

To conclude, incorporating your small business is not just a wise decision; it is a necessary business move that can provide you as a business owner with many great benefits. If you want to incorporate your company but don’t know where to start, you can check out www.wealthbridgecs.com/sg/incorporation for more information!

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About the author 

Kyrie Mattos

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