Top Reasons to Incorporate Your Business

Top Reasons to Incorporate Your Business

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by Jason Gibbs — 10 months ago in Business Ideas 4 min. read
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If you are an aspiring entrepreneur, you must be aware of all the business organizations that exist so that you can judge all of them and then decide what type of business you intend on starting. Before telling you what does inc mean in business, you should know the different types of business organizations that exist.


There are mainly five important types of businesses:-

●    Corporation

●    Partnership

●    Sole Proprietorship

●    Cooperative

●    Limited Liability Partnership (LLP)

How To Choose The Right Kind Of Business For Your Startup?

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Creating your own startup is quite challenging and risky; you must take a lot of factors into account before choosing your business. You first must think about the best investment ideas and then choose your business. The important factors while choosing a business are:-

1. Funding

If you have decided to start your business, you need someone to fund it. Therefore the chances of being a sole proprietor end right there. You will have to form either a partnership or a limited liability partnership (LLP) where the profits and losses will be shared equally.

2. Recruitment

Certain kinds of businesses, like a sole proprietorship, makes it very difficult for the recruitment of employees. If you need to hire employees and that too on a large scale, you would want to opt for a more structured business organization like Limited Liability Partnership or Corporation.
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3. Liabilities

If you don’t want your business to have unlimited liability, then I highly suggest you opt for limited liability partnerships or corporations. The advantage of making your business a limited liability partner or a corporation is that liability is limited only to the amount you invest in such forms of business.

4. Taxes and Returns

While starting your business, you get two options when it comes to filing your taxes and return. You can file your business expenses on your personal income or file business expenses on a separate business account. If you want to file taxes on your personal returns, then I suggest you opt for a sole proprietorship.

What does inc mean in business?

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Inc stands for incorporation. It is basically a process by which a business becomes incorporated. “Inc.” is an abbreviation that means that a company has been formally incorporated. In simple words, a corporation is totally a different entity from its owners and shareholders.

Mentioning this distinction is very important as an incorporated business is a different person as per law. In a business that is incorporated, liability is limited. The owners do not have unlimited liability, like in partnerships and sole proprietorships.

The liability of the owners and shareholders are only limited to the amount they invest in the company, and if an owner dies, an incorporated business does not stop there; it lives on as a separate entity.

4 reasons why you should incorporate your business?

There are a number of reasons why you should incorporate your business. In this article, I am going to list the top five reasons.

1. It Allows You To Sell Your Stocks

If your business is incorporated and if it is not doing well at the beginning, then you can opt to sell your stocks to contractors, employees, and vendors. Selling your stocks can be a lucrative option for both you and the people you sell the stocks to.
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2. It Allows You To Separate Personal Finance From The Business

In sole proprietorships and partnerships, the liability of the owner is unlimited, which means if the business incurs heavy losses, then the owners might have to sacrifice their personal assets and income.

Incorporating your business gives you the flexibility to separate your business finance from your personal finance, which means you will not be liable to the full extent. You are only liable for the amount you invest in the business. Incorporated businesses are like separate individuals.

3. Attracts Investors And Increases Business Credit

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Corporations give a very formal structure to your business. It is an extremely important necessity when you want to fund your business as corporation businesses allow the selling of stocks, so it becomes a lucrative option for investors.

The company has a separate existence, and it’s not exclusively associated with the owners and the shareholders. In partnerships and sole proprietorships, the owners have to sign contracts to win their own names, but it’s not the case with corporations.

4. It Makes Your Business Reliable

As incorporating your business gives your business a formal structure, it attains a ton of credibility in the eyes of employees, contractors, vendors, and customers, etc. You may find that after incorporating your business, it is well, you may also see a sharp rise in sales.
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Conclusion

Being an entrepreneur, you need to make a lot of choices; choosing what kind of business your organization is going to be is one of them—incorporating a business provides you a lot of advantages, even though it may sound like a very big step in the beginning. The pros of incorporating a business outweigh the cons.

Jason Gibbs

Jason Gibbs is a freelance content writer and enthusiastic blogger. He is the co-founder of Finance Team. He contributes to many authority blogs such as Sb News Room.

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