™
Client Log In About INC Right Contact Us Incorporation Asset Protection FAQ
The Cost of Cheap Incorporation
First things first. Try to answer the following question:
Would you rather invest $100, $1,000, or $10,000?
Can you answer this question? The truth is, you can't; nobody can, because there's no basis on which to evaluate it. The following questions must be answered before we can evaluate such a question?
-
What is meant by "invest"?
-
What is the return on my investment?
-
What am I investing in?
-
What are the ramifications of my investment?
Why are we being pedantic? Only to draw attention to a simple truth we all can easily lose sight of. This simple truth generally keeps us out of trouble daily. What is this truth? It is the principle that says we must exercise circumspection. That's what we do when we make important decisions in our lives, like buying a home, investing in our eventual retirement, hiring an employee, or choosing a college to attend. It involves thinking long term, far beyond the notion of price alone.
Incorporation - Product or Service?
One basic truth about incorporating that must be understood is that incorporation is not a product you purchase; it is a service in which you invest. Why is this? Because the process of incorporating entails many variables, and it is never the same from one person to the next. If you buy a car, for instance, it should be the same whether you buy it at Joe's Car Sales or Beverly Hills Auto Center, provided of course you have a particular model in mind.
On the other hand, when you look for a dentist, do you really call a list of dentists from the phone directory and ask them all, "What do you charge for a root canal?" Do you go with the cheapest you can find? Would you not look for someone well respected and good at what he or she does, preferably someone who comes highly recommended? He or she may (or may not) cost a little more, but that is not your primary concern. You have only one set of teeth; that is your primary concern.
Return On Investment
A second consideration to address is your return on investment. If incorporation is really to provide all those tax savings and asset protection benefits so often promoted, how will these desirable things come about? Are they automatic or must you do something to make them happen? In a nutshell, incorporation does nothing until you do something. The best analogy is the "sword and shield" analogy.
Suppose you buy a sword and shield to which you never actually take physical possession; all you receive is the title of ownership to this sword and shield. You now go home and place this proof of purchase in your file and go about life as before. You were previously advised that anyone who wants to cut taxes needs a sword, and anyone who wishes to protect themselves needs a shield. Now that you have your own, you feel much better, right?
Most people who incorporate do in essence exactly that. They put their corporate manual on the shelf and wait for their taxes to go down. God forbid they ever get sued. No corporation will effectively cut your taxes unless you implement those things which affect taxation. Who will be there as a resource to educate you on how to do this? No one, if you are like most small business owners. Who will educate you on how to implement your new corporation and on the formalities essential to maintaining a sound corporate veil? These things are the essence of incorporation, yet they are neglected in the majority of small corporations.
Do you realize you could have years of corporate tax savings retroactively denied by the IRS because you did not follow proper corporate formalities. As well, a lawsuit could find you personally liable for business debts if your corporate veil is pierced because of poor adherence to corporate formalities. How much did you think you saved when you incorporated with that other company? The point is, sometimes the price of being cheap is simply too high.
To get an idea of what you are investing in when you use U.S. Business Strategies, Inc. as your incorporator, read about The Process.
Webmaster | Disclaimer | Email Us | © 2004 U.S. Business Strategies, Inc. All rights reserved.