Companies and businesses that have been incorporated have always experienced tremendous benefits. Company incorporation is the most fundamental process of separating your business and personal life. Below are some of the advantages of company incorporation.
the first advantage that emanates from incorporating your company is business longevity. In this life, you will always have a limited lifespan and a time will come for you to depart from this life. You need to abhor having a sole proprietorship as it will eventually die the moment you die. Company incorporation enables you have heirs to your business and those heirs will always have heirs as long as the company is functional.
With an incorporated company, you will always benefit from limited liability. It is after separating your personal life from your company that you enjoy the benefits of limited liability. This helps you stay away of company liabilities and you will never be responsible whatsoever for the company debts. Where a company has debts and is sued or even files bankruptcy, your personal wealth and assets will never be at stake whatsoever.
The tax rates for incorporated businesses are always lower. You will not be subjected to full tax rates like a sole proprietor. Nonetheless, when you have incorporated your company and business, you are always allowed to pay a lower tax rate annually.
Where your company is incorporated, you will always benefit from tax deferrals. The profits for the company are company’s and you are only taxed for the income you earn. In other words, anything that is not part of your income is not taxed. Where you choose to not collect your salary from your company, you will not be taxed. Basically, this is a plus when compared to sole ownership of the business as all the profits are taxed instead.
Companies are not immune to losses and where you incur losses, you will never be allowed to pay taxes. However, there are businesses like the sole proprietorship that doesn’t allow you to carry the incurred loses forward to the next fiscal year. Where your company and business are incorporated, you are assured of carrying the losses forward until you have recovered fully.
Finally, where you have incorporated your company, you will have multiple payment options. For example, you are the one to decide whether your stakeholders are to be paid as salaries or dividends. Whichever option you settle for, your company will benefit. There are instances where you will be working with family members and instead of paying them salaries, you could have their salaries as part of company expense. there are instances where you can opt for dividends instead of salaries which will attract low taxes.
There are multiple and tremendous benefits of company incorporation. The above are just a few of the benefits. Therefore, make a point of incorporating your business and jettison sole proprietorship.