Benefits Of Incorporating

Outside of the obvious credit benefit, Incorporating your business offers the following general benefits.



Protection from Personal Liability
Incorporating is one of the best ways to protect a business owner from personal liability. Generally shareholders of a corporation are not liable for the obligations of the corporation. Creditors of a corporation may seek payment from the assets of a corporation, but not the assets of the shareholders. Non Personally-Guaranteed corporate credit is the only way that business owners may engage in business without risking their homes or other personal property.

Self-Employment Tax Savings
Corporate profits are not subject to Social Security, Medicare, Workers Compensation and other taxes - a combined 15.3% in taxes. A Sole- Proprietor would need to pay all of the taxes commonly referred to as “self-employment taxes” on all income earned by the business. With a corporation, only salaries are subject to these taxes.

Ability to Deduct Business Operating Losses
Corporations have very few restrictions on operating and capital losses. Losses are generally carried back three years and can be carried forward for 15 years. Sole proprietorships not only have stricter rules, but also are subject to a higher probability of audit if there are losses.

Retirement: Retirement plans, such as a 401K, can be set up through a corporation that would allow you to exclude a higher amount of income than a regular IRA. With a corporate entity, savings may also be doubled with a corporate matching program.

Medical Insurance: Corporations can deduct 100% of the health insurance premiums paid on behalf of an owner-employee. As a sole proprietor filing an individual return, only 60% of the medical premium is currently deductible.

Fringe Benefits and Deductions: With proper structuring, a corporation may deduct other expenses such as automobile insurance, education benefits and life insurance. These expenses are subject to strict limitations for sole proprietors (if deductible at all). Moreover, these expenses can be "red flags" that trigger audits for individuals. For example, an individual proprietor who wants to deduct expenses from a home office can trigger IRS scrutiny.

Lower Chance of an IRS Audit
On a percentage basis, the IRS conducts fewer audits on corporations than individuals. Corporate returns also have fewer "red flags" than individual returns.

Overall, incorporating is one of the best ways a business owner has to protect his or her personal assets, while saving thousands of dollars in taxes.

Business Credit Master Inc is not a law firm. As such we cannot, by law, give you legal or tax advice. If you would like to find a tax or legal solution for your business please CLICK HERE

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