Incorporating your business may sound intimidating but in the long run it will be better for you and your business. Forming a corporation, or a Limited Liability Company (LLC), involves the recognition that your business is a person in the eyes of the law. An LLC can be taxed, buy and sell property, bring lawsuits, and commit and be charged with crimes. The creation of this legal entity in turn protects business owners from certain personal liabilities regarding the running of the organization. Incorporation also comes with other pluses.
- Credibility: The "Inc." or "LLC" following your business name is a stamp of credibility and authority. The distinction can help draw in customers and partners who are more comfortable doing business with incorporated companies.
- Branding: In most states creating an LLC prevents other businesses from filing with your corporate name in the same state. This allows your company to develop a reputation around its name and can strengthen your organization's identity.
- Longevity: Corporations continue to exist regardless of ownership or management changes in your business.
- Tax Deductions: LLCs are able to deduct typical business expenses — including employee salaries — from total income when determining taxable income reported to the IRS.
While incorporating is often as simple as filing a charter with your respective state, it does require extra administration work, and brings with it further tax burdens. This can be problematic for businesses in their early days, who need all the capital they can get to build their company. Overall, though, the legal protection and other benefits of incorporating far outweigh the risks, and every business should approach a time when it is right to create an LLC.