Is Business Incorporation Right For Your Business?
By Richard Taylor

If you're trying to decide whether
or not Business Incorporation
is the right avenue for your business,
you should consider the following points.

When you incorporate your business,
you're legally separating it from yourself
and officially giving it a separate legal

Before incorporation, you as the owner
of the business, personally own the assets
of the business.  But, far more importantly, you are also personally responsible for its
debts and liabilities.   This means that if your business fails, your own personal assets
are at risk!

Therefore it may be a significant benefit to you, if you decide to incorporate your
business as you will protect your personal property and assets.

After becoming incorporated, you will only be personally liable for amounts owed by
the business up to the amount you have invested in the business.

Beyond your invested capital, you will have no further personal liability for the
settlement of debts owed to your business's creditors, unless of course, you have
signed separate personal guarantees for any specific loans or debts.

Personal guarantees may be necessary where your business has little trading history,
or where your balance sheet is not robust enough to provide sufficient guarantees to

There is also another benefit of incorporation.  The flip side of the above personal
protection from your business's debts, is your business will also be isolated from any
personal financial problems you incur in your private live.

You should also be aware that, should for any reason your incorporated business
cease to trade, all of its  creditors and liabilities must be paid before you receive any of
your invested capital back.  Basically, in times of trouble, shareholders are always the
last in line for repayment.

Your decision to incorporate your business is a very important one, particularly if
you're expecting to expand your business in the future. Incorporated companies will
often find it easier to raise new capital required for expansion from financial

Incorporating your business sends a message to the financial world that your business
will be around for the long term, and that feeling of security makes it easier to find
additional finance.

Becoming incorporated also allows you to transfer ownership of your business easily.  
Separation of the business's assets and liabilities from your personal assets makes it
easier to value your business.  Becoming incorporated also eases the introduction of
retirement plans and insurance schemes.

Once incorporated, your company is governed by its Board of Directors.  The Directors
are elected by the shareholders, who then act as agents of the company on behalf of the

Finally, business tax rates are much lower than personal tax rates.  There are some
issues of double taxation to consider though.  Whilst there may be tax benefits, there
will be some additional legal costs and administration costs associated with being an
incorporated company to consider.

About the author:  Richard Taylor MBA is a Chartered Management Accountant and
Company Director with a specific interest in small business start ups.  Click on the
following link to learn more about the pros and cons of becoming incorporated:
Incorporate My Busness.

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