Startups, Sole Proprietors or Partnerships benefit immensely from Incorporating their Businesses. The benefits Businesses gain from Incorporating their Businesses outweighs so called downsides in terms of cost or time consumption in Incorporating the Businesses.
Read our simple 5 point benefits of Incorporating a Business as follows for further clarification on the topic.
1. Security: Drawing a line between Personal & Business Assets
Incorporation of Business brings personal assets protection to the founder of the business. This makes business a separate legal entity that can own its own property, carry on business activities, incur liabilities and make legal arrangements for the business.
Incorporation is further entitled to its own credit & debts. That means creditors of a corporation generally can seek payment only from the assets of the corporation and not from the personal assets of shareholders, directors and officers.
In effect, that means business owners can conduct business without risking their own assets like homes, cars, savings, or other personal property. Owners of a sole proprietorship or partnership, on the other hand, face unlimited liability for both business and personal assets.
2. Capital Access: Easy to raise Capital for your Business
Banks perceive Incorporations as a stable entity and don’t hesitate much to lend money. Therefore Corporations stand higher chances of raising Capital from lenders, making it easier for them to stabilize, grow and to pay off their debt as compared to unincorporated business ventures.
3. Credibility: Enhance Your Business’ Reputation
Corporations are seen as more stable entities than unincorporated businesses. Having “Inc.” or “Corp.” after your business name provides credibility to your business and builds trust in lenders and business partners.
4. Infinite Existence: Branding, Anonymity & Exit Plan
- Setting up a Brand, which is there to last for decades is the main objective of the entrepreneurs. Businesses when incorporated become the most enduring legal business structure. A corporation can continue indefinitely, regardless of what happens to its individual directors, officers, managers, or shareholders.
- Getting anonymity of the real brains working behind the business becomes a challenge sometimes for the business entities. But a corporation can offer anonymity to its owners. If you want to open a small business and don’t want your involvement to be public knowledge, your best choice may be to incorporate.
- Finalizing your exit / retirement plan becomes easier with an incorporated business. Incorporated business may give salaries to directors / employees, health benefits, and contributions to qualified pensions and retirement plans for directors / employees.
5. Ease of doing Business
Starting up a business and worried about getting credit from the lender? Incorporated Businesses have easier access to Credit and other Government Schemes. Thus making it easier to set up and run your business smoothly as compared to unincorporated businesses.