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At some point or time in running your clothing business you are going to want to form a legal entity. Whether it is a LLC, partnership?or you decide to incorporate the time will come. Today I want to talk a little about incorporation and the pros and cons of incorporating.

Pros

Protect Assets?

• Some of the reasons that small businesses decide to incorporate in the first place is to protect there personal assets from being seized in the case that your business fails or is in debt. Otherwise they have the right to seize your car and home anything in your personal ownership. The same is true with a LLC (Limited Liability Corporation)?legal entity.

Tax Benefits

• A business that is incorporated usually enjoys tax benefits. Their taxes are lower than a sole proprietorship-which is basically an individual person owning and operating a business, but most of your personal assets are still up for grabs… .

Better For Attracting?Investors?

• If a corporation ever wanted to take on some new investors they could sell stock in exchange for capital. Investors find ownership in a company very appealing…like you guys didn’t know that.

Credit

• A corporation’s credit rating is separate from the owner or majority shareholders. It forms its own rating through business interactions and partnerships and using what is called corporate credit.
• I’ve heard of?some people who have illegally set up dummy corporations to use as a new source of credit due to theirs being very low

Better Business Structure

• A corporation is divided into a power structure ranging from directors, officers, and the shareholders. Each group of workers know their responsibilities within the corporation.

Cons

Time and Cost!

• The amount of time it takes and the cost is sometimes unattractive for small business owners, but you have to remember it protects your personal assets. So the time and cost it will take for you to put your life back together after they seize your house and your home = PRICELESS.

You Must Follow A Set Of Rules

• In the business world they call them formalities, but we will just say rules. A corporation must follow them in order to set the business owner and the corporation apart, because once incorporated they are separate entities.

Potential of a Double Tax Charge

• If the purchaser of your business doesn’t agree to buy the shares the owner may be taxed and the business will be taxed. Profits may be taxed also, which means the a shareholder (In a form of?dividends)?may be taxed and the business itself may be taxed as well on profiting from the company.

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