While there are some cogent arguments, depending on a small business owner's exact situation, against incorporating, it's more frequently a good idea to do so, writes financial expert Carlise Newman for business blog Inc.Well.
Whether forming a New York LLC or forming another type of company in California, for example, incorporation carries with it a host of legal and financial benefits. For one thing, Newman writes, it significantly reduce a small business owner's legal liability. This means, if the business is sued, the owner's personal assets are usually protected from any financial penalties resulting from a settlement or judgment.
Additionally, according to Newman, the tax upsides of incorporating are significant. Particularly if a small business owner elects to assume Subchapter S status, all corporate income, after deducting a "reasonable" salary, is treated as a dividend, and as such, is not subject to payroll tax.
Experts note that one significant lawsuit can wipe out a fledgling company, and that the increasing frequency of questionable claims makes incorporation an important defense for small business owners.
Tags : llc formation
Posted: Apr 18th, 2011