I know, we are all pushed for time so I’ll keep this short and sweet.
In my last post, I promised to write about the benefits of incorporation so here goes:
Incorporating your business means that:
- Your personal assets are protected in case the company has to be liquidated or dissolved. This usually happens when the company is unable to meet its financial commitments and its assets have to be sold to pay off its debts.
- You are personally protected from bankruptcy arising from business losses. This makes it easier to recover from any business failures and to try again. You may however legally be disqualified from starting a limited company if there is evidence of criminal negligence.
- There are tax advantages in the form of lower tax rates and deductible expenses for limited companies
- Established business are more inclined to do business with another limited businesses as it is perceived as less risky than working with individuals
- Incorporation offers improved credibility and perception by the public
- It is easier to raise finance from investors by offering equity in the form of shares
- It is easier to sell or transfer ownership of an incorporated business
- Incorporation creates a legacy for posterity which will potentially attract inheritance tax reliefs unavailable to unincorporated businesses
- Incorporation enables you to protect a business name until you are ready to trade with it. Companies can be registered as dormant if there is no immediate need to trade with them.
- Loan finance is easier from banks and other financial institutions.
Of course there is always a catch! The main issues with incorporation are the burden and cost of compliance. If you are however serious about running a profitable business then you shouldn’t be discouraged by any of this.The benefits of incorporation far outweigh the disadvantages. There are rogues out there registering companies, siphoning funds out of the businesses and declaring it bankrupt just to start all over again! You need to protect your personal assets in case you were unfortunate enough to encounter any of these people. Be wise, consider your industry and business and take appropriate steps to protect yourself!
It is always good to get feedback, if you found this post useful then please leave a comment. We would love to hear about your experiences with incorporation or un-incorporation.