What You Need To Know About Incorporating Your Business

Most US-based small businesses are getting eaten alive in taxes! That statement has proven itself true over and over again. However, while small business owners want to save money, many are literally afraid of incorporating their companies. The paperwork, the additional reports, having a set payroll amount each month, and other visions swirl around their heads. Those visions could be costing you a ton!

Let me take a few minutes to explain what you need to know about incorporating your business. While it certainly isn’t a move every business will want to make, there are definitely some large benefits associated with incorporation.

MYTH
Incorporating means I can’t take money whenever I want it.

TRUTH
Yes you can! This is a MYTH that holds a lot of small business owners back from incorporating. If you set a payroll amount for yourself, then decide you want/need more money, you simply write yourself another check and call it an "owner distribution" or a "draw."

MYTH
There’s too much paperwork involved once you incorporate. I don’t have the time.

TRUTH
There are some additional forms you have to complete. There are some additional taxes you have to pay. HOWEVER... read this carefully... for the three or four extra forms and the cost of the additional taxes, most businesses will still save when compared to counting every dollar you make toward personal income.

MYTH
The only good reason to incorporate is for personal protection. The difference in taxes isn’t that much.

TRUTH
While incorporating your business will help protect you from lawsuits and from having your personal property seized, there are more benefits than that. The tax savings can be quite significant.

MYTH
With the attorney’s fees, the CPA’s fees, the additional income tax returns, and the forms I have to file quarterly, it’s just not worth it. I won’t really save any money.

TRUTH
Every case is different; however, most small businesses will more than make up the $1500 - $2000 it costs to incorporate within the first six months to one year. Also, most small businesses will save about 50% on taxes after they incorporate. (A qualified CPA will be able to look at your books and give you a more accurate figure.)

MYTH
I’ll have to hold meetings and keep lots of records that I don’t have time to keep.

TRUTH
Not if you register as a "closed" S-Corporation. This means you have waived the requirement to hold all those meetings and keep all those records.

How Do You Get Specific Details?

Contact a qualified CPA in your local area. He or she can give you detailed information on how much it will cost to set everything up, and - most importantly - how much you will save in taxes

Incorporation is not something to be afraid of. In fact, if you’re one of the many who will save 50% off your taxes in the next year, it’s something to go after with a vengeance! 

 by: Diane Hughes

Tax Advantages of Incorporating a Business - Travel Expense Deductions

Los Angeles, CA (ArticleCity via ArticleCity.com) October 25, 2006 -- Kevin Wessell, renowned asset protection and estate planning expert said today that business travelers should be aware of a legal and proper program for a US tax deduction that allows them to travel on business, perhaps spend some leisure time on their trip, and deduct 100% of the transportation costs for the trip. Wessell heads LA area-based Companies Incorporated that provides corporation formation in all 50 US states, asset protection, offshore trusts accounts and estate planning. Information on Mr. Wessell and CI’s suite of services for businesspersons can be accessed via their web site at http://www.companiesinc.com.

Deducting Business Trips

Wessell points out: “As you probably know, when taking a vacation is the main purpose for traveling, the IRS does not allow you to deduct your transportation expenses. Whereas, if the main reason for the trip is a business purpose, the IRS says you can deduct 100% of your transportation cost for travel within the US. Therefore, the aim is to be sure that the main purpose of the trip is business. There is no law against having a bit of fun while on your business trip. Do things right and you can deduct 100% of your transportation expenses.”

He went on to point out, “Here is one provision that is quite controversial but has passed the IRS muster: If you do business on Wednesday through Friday and stay Saturday and Sunday, are the last two days tax deductible? The answer is quite straightforward - it depends. If the purpose of staying the weekend is to have a couple of vacation days, it probably is not. However, if the purpose is to save money on airfare because a Saturday night stay lowers the plane fare more than the costs of staying an extra night or two, it likely is.”

It’s essential to figure out exactly what is required to deduct travel without raising red flags. If an audit reveals you have crossed the line, not only will you not be allowed your deductions, but you will also be required to pay interest on the amounts owed plus pay a penalty of 5%. Moreover, if the IRS determines that you have purposefully broken the rules, the penalty can be as high as 50%, according to Wessell.

He added, “Prior to writing off your business trip, be sure your deductions are legitimate. The size of your deductions is reliant upon the purpose of your trip. The IRS classifies travel as either entirely business, primarily for business or primarily for personal reasons.”

Wessell said in conclusion, “The most audited business type is the sole proprietorship or partnership - more specifically, the Schedule “C” (self employment form). The least audited type of business is a corporation. So, having the corporation pay for a business trip is less likely to be taken to task than taking the same deduction through the previously mentioned business types. As an employee, you can deduct un-reimbursed travel expenses if you need to do business away from home. Transportation costs, lodging, laundry, telephone and Internet expenses are some of the available deductions. Usually, meals are 50% deductible too.”

About Companies Incorporated

Established in 1977, privately-held Companies Incorporated serves both large and small businesses throughout the USA and in some foreign locales with incorporating services, establishing LLCs (limited liability companies) to creating offshore companies aimed at protecting assets to legally reducing annual taxes. CI also provides services to establish S corporations and non-profit organizations as well. CI holds national seminars on its various services, most recently to a sell-out gathering of professionals in a prestigious Las Vegas hotel.

by: Kevin Wessell

Is Incorporating Your Small Business Best For You?

There comes a point in time when every small business person contemplates on whether to incorporate their business or not. A lot of times small businesses start out sole proprietorships, 
and then become incorporated as the business expands and develops. Small business incorporating can be a difficult decision, and with this article you’ll gain a little bit of knowledge on the advantages and disadvantages. There are many advantages to incorporating your small business, but limited liability is one of the biggest advantages. When you have sole proprietorship to the company all the liability of the company is on the owner. When incorporating the business, your only liability is to however much you invest in the company. 

With sole proprietorship, all of your personal belongings, such as car and home, can be turned over to help pay the debt of the business. As a shareholder in the business, you have no 
responsibility whatsoever for the debts of the business, that is of course unless you give a guarantee.  Another advantage to incorporating a small business is the ability to raise money so much easier. With the ability to raise money much easier, this increases the odds of the 
corporation growing and expanding. Yes, you’re saying any sole proprietorship can borrow money and incur debt like any corporation. However, with a corporation you can sell shares 
and raise equity capital, which is a big advantage in that you generally don’t have to repay equity capital and it has no interest. 

There are many tax advantages with becoming a corporation that you can take a look at as well. Some of these advantages include income splitting, potential tax deferral and more. Along with the reasons above, a corporation can have an unlimited life. The life of a corporation is not dependent on particular individuals, but the company as a whole. With this, the company has the opportunity of lasting forever just as long merges with another company or goes bankrupt. 

Now that I’ve buttered up the idea of incorporating your small business, let’s take a look at some of the possible negatives. As you incorporate your small business, there now will be twtax returns to file each year, one for your personal income and one for the corporation. This may not be a huge deal, but unlike a sole proprietorship a corporation cannot deduct its losses from the personal income of the owner. Plus, having another tax return is the last thing another business owner wants to deal with. 

As a corporation is much larger and more complex than a small business, therefore the cost to create one is much higher. Just to set up the corporation will cost a lot more, then you have to 
tack on the increased maintenance fees, accounting fees, and more. As with everything else, a larger business means more paperwork that must be taken care of. Corporations must keep a minute book, which contains the corporate bylaws and minutes from corporate meetings.Reports and tax returns must be completed neatly and in a timely fashion. All of the business bank  accounts and records have to be kept separate from personal accounts and assets. That may sound like a load, but that is just the start of the increased paperwork that comes with the 
territory of incorporating your small business. While there are many advantages and is advantages to incorporating your small business, the decision ultimately goes to you. It is a decision that could make or break your business; therefore much more research is recommended. However, small business incorporating should be a thing that suites you and others associated with you best.

By: Singh

Why Incorporate Your Business?

Entrepreneurs embark on costly business ventures without first looking into the form of business that would be most suitable for them given their business experience and financial capability. Deciding on what legal form your venture is going to take will spell the difference when you experience difficulty in your business later on.

A businessman can choose from different business forms including sole or single proprietorship, partnership or a corporation. Each of these legal forms has their own advantages and disadvantages and a businessman should be well aware of their implications on his business venture.

Sole proprietorship is the easiest business venture to put up because you only have yourself to disagree with. This means you can go ahead with whatever plans you have and you can implement them anytime. It means that when your venture succeeds then you will reap all the financial rewards of your business. The sad fact is that this can also be a disadvantage since it can also mean that you will shoulder all the losses if the business fails.

A partnership will do well for business ventures that require more capital and more skills and expertise. You and your partner can concentrate on the different aspects of the business depending on your skills and talents. A partnership form of business means both you and your partner get to share your financial earnings and losses. However, there could be a problem if the business acquires debts because your creditors can run even after your personal money and not just after the capital infused into the business.

The most ideal, although complicated, type of doing business is the corporation. Incorporating your business would mean bringing in other people to the business. This would mean no decision can be reached without the agreement of the majority of the Board of Directors. The good thing about a corporation is the availability of vast financial resources for the business.

A corporation is a distinct legal entity from its incorporators and shareholders so that in case the business incurs debts, the share or stockholders will only answer for the debts depending on the shares they have in the corporation. This is called the theory of limited liability. The creditors will no longer have any right to seek payment from the personal finances of the stockholders.

A business can start as a sole proprietorship but the owner can chose to incorporate the business later as it grows. True, there are more documentation requirements for incorporating a business but the advantages of incorporating a business far outweigh the disadvantages.

                                                                                                                                              By: Scott Miller

8 Advantages Of Incorporating A Business

Incorporating a business is not difficult it can be done online or physically. Anyone who has a business can incorporate his business irrespective of size. There are many types of corporations available in the US so before you incorporate your business learn about the different kinds of business structures available in the US. You must also find out what the advantages and disadvantages of incorporating business in different states are. Incorporation of a business can be handled by a qualified lawyer or professional incorporating services. The main document that has to be filed for incorporating a business is known as the ‘articles of incorporation.” And, filing fees need to be paid to appropriate state agencies. 

Incorporating a business has several advantages. Even if your operation is a single person one forming a corporation means creating a separate legal entity which is a separate individual. According to business gurus incorporating is a must as it:

1. Protects the owners from personal liabilities. This means you and your family or partners will not be legally liable for any business related payments in case of debt. Incorporating a business protects your home and personal assets from risks.

2. Corporations pay lower taxes and do not pay social security, Medicare, and workers compensation and so on. This is almost 15.3% in taxes and payable by individual proprietors. As a corporation you will save money.

3. Incorporating a company as a c-corporation can save almost 15% tax. By dividing the income between the corporation and shareholders business save thousands of dollars every year. Greater savings lei in re-investing profits in other business ventures and employee perks.

4. Corporations can deduct business losses and these can be carried back three years and forward for 15 years.

5. In a corporation, great savings are made by introducing retirement plans and corporate matching programs.

6. A corporation ensures continuity of the business even after the demise of the owner or shareholder.

7. Setting up a corporation results in adoption of modern management techniques and creation of central management systems. This prevents duplication of efforts and smooth functioning of the organization.

8. Setting up a corporation means ownership can be easily transferred by transferring the stock held.

Incorporation lends business longevity and protects it from inheritance squabbles. Incorporation can also be done such that it offers anonymity to its owners. When a business is a corporation it is easier to raise capital and sell stock or equity to raise operating funds. Investors and financial institutions are less likely to invest in a company that is individually owned. 

                                                                                                                                            By: Arthur Raise