Should Your Small Business Incorporate?

When startups begin they are often a sole proprietorship. Essentially the owner(s) and the business are the same. If a business changes from sole proprietorship to either a corporation or a Limited Liability Company (LLC) there are certain benefits for entrepreneurs. For example, personal assets are protected for corporations or LLC’s if legal action or debts are filed against a business. E.J. Dealy, CEO of The Company Corporation, the small business unit at Corporation Service Company® (CSC®), which incorporates tens of thousands of new businesses annually, writes about some advantages of incorporating a small business. Should Your Business Incorporate or Form a LLC?

  1. Personal asset protection – Corporations and LLCs separate and protect owners personal assets. Owners should have limited liability for business debts and obligations.
  2. Additional credibility and name protection – “Adding “Inc.” or “LLC” after your business name can add instant legitimacy and authority. Consumers, vendors, and partners frequently prefer to do business with an incorporated company. In most states, other businesses may not form an entity or use a trade name that is the same as your corporate name. This benefits the business legally and helps in brand-building and marketing.”
  3. Perpetual existence  – If ownership or management should change, a corporation or LLC can continue to exist. Conversely if a sole proprietor or partner dies or leaves the business, then the business ends.

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