Incorporating a business has benefits and drawbacks, comparatively speaking, following this line of thinking the benefits outweigh the drawbacks depending on the goals of the people or person who started the business in the first place. Taking this step turns the business into a single unit or entity in the eyes of the government as it pertains to earnings and taxes. Some of the benefits are:
- Receiving Tax breaks
- Financial flexibility, (to a point)
- Limited liability
Accordingly, these same benefits can also have drawbacks for instance the tax breaks or credits allowed as a sole proprietorship are lost once the business becomes a corporation. On the financial front certain aspects of how the business is operated can actually limit the flexibility by reducing the availability of financial resources. In the realm of liabilities the owner of the business is not responsible for any debts incurred by the corporation.
One true benefit is that because, as a corporation, the business is governed by a board of directors, this translates into the continuation of the business after the originator has passed. This includes both board members and stakeholders of the governing body in addition. However, in this respect all managerial decisions become the burden of the directors and not the originator of the business. As stated there are two sides of the decision to incorporate your business and as such should not be taken lightly.
Envolta can help with this process by discussing both sides and how they can benefit your goals for your business.