Your business has been evolving for a while now. Gone are the days when you operated out of your garage or from the kitchen table. Now, you have a storefront, a website, a thriving customer base and several employees.
Has your business structure grown along with your business? Are you still operating as a sole proprietor? Maybe it’s time to evolve. Here’s why:
You can lessen your tax burden
If you’re still operating as a sole proprietor or a partnership, all of the profits from the business “pass through” the business to the owners. That can vastly increase the personal tax liability of the owners. Changing to a different type of business structure (like an S or C corporation) can ease your personal tax liability and help you retain money in the company that is needed for its development and growth.
You can reduce your personal liability
An incorporated business is its own legal entity, while a sole proprietorship or partnership is indistinguishable from its owner(s). If your business gets sued, you could personally be on the hook for any judgment that is rendered. By incorporating, you protect your personal assets from your business losses and your business from your personal financial matters.
You can gain investor interest
Investors won’t pour their money into a company that doesn’t have a formal structure (like a limited liability company or a corporation). The formal structure helps eliminate confusion and establish everyone’s rights and responsibilities — which is something investors expect. If you want to bring in “outside money” to fuel your company’s growth, you may need to incorporate.
Don’t let your uncertainty about the formalities of a business structure stop you from achieving your goals. An attorney here in Texas can help you take the right steps toward a more productive future.