If you have a brilliant new business idea, you may feel rushed to turn that concept into a money-generating business. The timeline for creating and starting up a company often becomes longer when there are more details to handle.
If you worry that someone else is going to corner the market niche that you hope to occupy, trying to get your business off the ground as soon as possible may seem like a good strategy. However, you also need to consider the long-term use of both you and the company.
Taking the time to create the right business structure can be very important. For many companies, incorporation is a critical step during business formation. Deciding to form a corporation instead of maintaining sole proprietorship or starting a partnership can offer distinct benefits.
You can protect your personal assets
In a sole proprietorship or partnership, you may have personal risk if the business fails, if your products hurt someone or if an employee gets injured on the job. Individuals or other companies could bring a lawsuit against you and possibly lay claim to your personal assets. When you incorporate, you protect your personal assets from claims by creditors or vulnerability if the business faces a lawsuit.
Your business becomes its own entity
With a sole proprietorship or partnership, if the owner or one of the partners dies, the business may struggle and possibly fail as a result. When you incorporate, the business becomes its own legal entity which will continue to exist regardless of what happens to you or other individuals involved in the company.
You will have more tax options and benefits
Certain tax codes directly benefit corporations. When you incorporate, you will have more options for write-offs and deductions, and possibly other tax benefits as well, including deferred accounting.
If you aren’t sure whether incorporation is really necessary for your planned business, talking about business formation with an attorney before you move forward with founding the company can help you optimize your protections while streamlining the business formation process.