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Incorporation
Incorporation is fundamental to the success of any business enterprise. Incorporation tells the world you mean business.
In the litigious culture we’re in, business owners either incorporate their businesses or they put their families and their families’ assets at risk. For many, this is not an acceptable alternative.
U.S. Business Strategies, Inc. can help you structure your affairs to protect your family from business liabilities while at the same time significantly lowering your taxes. Imagine that, protection with a profit.
What Is A Corporation?
In a nutshell, it is a legal entity sanctioned by the state of its formation that allows persons to pool funds, services and assets for a business purpose, without at the same time putting at risk more than was contributed to the corporation for that particular venture. A corporation is like a ship. If the ship goes down, only that which is on the ship goes down with it.
When Should You Incorporate?
This is a question that if you ask 10 different professionals you will get ten different answers. Be aware of this before you put too much faith in your advisors. The point is this; you and you alone will either reap the benefits or pay the consequences of your own decisions. No legal or tax advisor will compensate you for losses that result from their bad advice.
A few questions to ask yourself:
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Would you care if your assets were taken in a lawsuit that originated against your business?
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Are you paying enough taxes where a 30% reduction would be a welcome relief?
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Do you want to be able to pass your business seamlessly to your heirs without disruption to the business or your family?
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Do you want to sell your business one day and desire to maximize its value?
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Do you have business partners and wish to keep their liabilities separate from your family’s assets?
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Do you want to establish a fresh credit history for your business?
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Do you care if your business credit negatively impacts your personal credit?
If you answered “no” to all of the above questions, then by all means, do not incorporate. If you answered yes to any of the questions, then you should at least follow up with a U.S. Business Strategies consultant and get more information.
Corporations and Taxes
Corporations enjoy the most generous tax breaks of all. Why? Is it because the government is for the rich at the little person’s expense? Not quite. Did you know that corporations are the bread and butter of our economy? The day corporations cease to exist is the day our economy as we know it will collapse. The government gives corporations tax breaks because corporations create jobs, and jobs mean employees, and employees mean taxpayers, and taxpayers mean money for the government.
Most corporations, however, are not fortune 500 companies, but small business owners who are trying to provide for their families like the rest of us. Fortunately, corporate tax law applies to all corporations and not just the big ones. Why would anyone knowingly pay higher taxes while having the greatest possible exposure to legal harassment? There must be a good reason, because people do it all the time.
An Example
A typical example would be Tim, a sole proprietor, who earns $30,000 per year; the last person you would expect to incorporate. To make the scenario even more tenuous, Tim is a single guy and doesn’t even own his own home. He pays about $9,000 per year in combined federal, state and FICA taxes. His accountant told him to wait until he was making over $100,000 per year to incorporate. Tim doesn’t know that by incorporating and employing a few simple tax strategies, he could literally lower his taxes by as much as $3,000 or more. U.S. Business Strategies can show you how to do this also.
Just for fun, let’s say Tim likes paying a lot in taxes, so he isn’t concerned about keeping an extra $250 per month (he makes so much money, $250 per month is chump change). If Tim’s business is sued while it is still a sole proprietorship and Tim loses, even though he has few assets of any significance, he now has a judgment on his personal credit that will be an ongoing source of frustration for years to come. Will Tim’s “tax professional” feel bad for his terrible advice? Probably not; if he does, it won’t matter anyway, because it’s too late; it’s Tim’s problem now.
It costs nothing to sit down with a U.S. Business Strategies consultant and discuss options. Who knows, maybe you'll have a few dollars left over this year after all.
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