I have a business and am classified as a Sole Proprietorship, should I incorporate my business? – Beatrice, NE
Incorporating your business can be one of the more challenging questions. The concept of incorporation is to allow your business to legally separate from your personal liability. Incorporation can be termed as a Limited Liability Corporation (LLC), S Corp, or C Corp. Each have its benefits and differences and knowing which one, if any, is appropriate for your business depends on your personal business mission and situation. Contacting an attorney to determine the legal benefits is always a good idea, while contacting a professional account concerning the tax benefits can also help. To say every business needs to be incorporated is simply unnecessary. The majority of small businesses are classified as sole proprietors. I usually use 2 factors to determine if a business should be incorporated. First, is the business risky or dangerous to others? For example, the level of risk in opening a cleaning business is different than a construction business concerning the level of injury or property damage. Second, do you have significant personal assets to protect against your business operations? Most of the time, entrepreneurs get incorporated when it is unnecessary. Either the specific business does not provide a significant risk or the owner has no assets to protect. There is perception that a business needs to be incorporated to “officially” be a business. That is untrue. Incorporation seems to bring creditability to the business in some industries, such as banking and contracting, but being incorporated is not a prerequisite to being a business.