What would happen if your business was sued or went out of business today? To what extent would you be held personally liable? The answer depends on the structure of your business. A sole proprietorship exposes you to virtually unlimited personal liability for business debts and lawsuits. You could lose your home, your car or other assets. If you go out of business as a sole proprietorship, you are personally liable for debts of the business.
Protect your personal assets. Incorporating your business can limit your personal liability to the investment you made in the business, and offers protection to your personal assets.
Tax Advantages. Corporations are taxed differently than individuals and often pay less in taxes than sole proprietorships. Deductions are available to corporations that are otherwise unavailable to sole proprietorships or unincorporated partnerships. Individuals can rent personal assets used by the corporation, to the corporation and can deduct depreciation; this cannot be done in a sole proprietorship. In a corporation some taxes can be deferred.
Credibility. Incorporating your business adds credibility and professionalism to your business name. Clients are more confident doing business with a corporation than with a sole proprietorship.
Transfer of Ownership. Corporations are much easier to sell than sole proprietorships. Buyers recognize and are attracted to the limited liability and tax benefits of a corporation. To sell a corporation, you sell shares of the corporation. You can sell some or all of the shares, transferring some or all of the ownership.
Raising Capital. Raising capital to grow and develop your business is easier in a corporation than in a sole proprietorship. Like a sole proprietorship, corporations can borrow money. Corporations, unlike sole proprietorships, can sell shares to investors to raise capital. Capital, generally, does not have to be repaid and incurs no interest.
Please contact us at info@thevclawgroup.com or 858.519.7333 if you have any questions.