When is the Right Time to Incorporate Your Business?

Wondering When to Incorporate? It Might be Sooner Than You Think

Whether you’re just starting out or have already been operating your small business for a while, the question eventually comes up: when should I incorporate my business?

The simple answer is, if you’ve taken the jump from side project to full time, the time to incorporate is now. But what if you’re in between?

That’s where this article will help. We’ll go over all the main benefits of incorporating, including reasons why you might want to incorporate sooner than you may have initially imagined.

Why You Should Incorporate Early

Whether you’re based in a jurisdiction like the US with multiple corporate structures, including LLCs, C-Corps and S-Corps, or are based in a jurisdiction like Canada, with the corporation being the predominant corporate entity, there are considerable benefits to incorporating early on. The legal and tax benefits are to be expected, but there are also operational reasons to incorporate early that will save you future headaches.

Limited Liability

Limiting your personal liability is the primary legal reason to incorporate. The benefits of limited liability cannot be overstated. By incorporating, you will separate your personal and business obligations.

For example, if you incorporate and your business goes south, your personal assets will remain protected and untouched. If you do not incorporate and operate your business as a sole proprietorship or a partnership, you will remain personally responsible for the debts of the business, which can put your personal property (like your home, car, and computers) all at risk.

Taxes

Taxes are always a tough, but necessary pill to swallow. Incorporating, however, is a common way to minimize your tax burden. This is because LLCs and corporations are taxed differently than individuals. In practical terms, and depending on the type of corporate structure you choose, you’ll have more options to minimize the taxes your business owes by paying yourself through salary, dividends, or a combination of both. This ultimately leaves more money for you to reinvest back into your business.

Tax questions are confusing and depend on each business. It’s always best to speak with a tax professional as your business grows.

Acting Like a Pro

Another benefit to incorporating: your business will appear more professional. After you’ve incorporated, you’ll send invoices through your corporate entity, rather than your personal name. And as we know, anything that helps your business seem larger than it is, whether you’re a freelancer, startup or small business, will help you land the bigger clients.

Saving You Future Headaches

Now, for the one reason you weren’t expecting: incorporating today will save you future headaches and hassle. If you’re going to charge money for your product or service, you’ll need to set up a lot of processes and software at the outset: payment processors, accounting software, purchasing domain names, bank accounts and more. If you don’t start by incorporating, you’ll have to go through the hassle of switching over all these items to your actual LLC or corporation once it’s setup.

Switching these over isn’t a small endeavor and by making the decision early on to incorporate, you’ll save hours of time, allowing you to focus on what you do best – growing your business!

Incorporate Now, It’s Easier Than Ever

Don’t worry, incorporating is a breeze! With online services like Founded, incorporating is simple and affordable, including all necessary legal paperwork and filings.

You’ve checked most of the boxes: researched the idea, checked the name, registered the domain (maybe even the new .INC domain name!), and you know how you’re going to make money. Now, check off the last box and get that business incorporated and primed for success! Learn how to incorporate your company on Founded.