People who want to start their own business often start on a small scale. Statistics suggest that a lot of people are earning well with the help of small businesses.
There are 28 million small businesses in the US and more than 20 million people are self-employed. Most of them begin their business journey as sole proprietors. In sole proprietorship, the person and business are treated as the same entity and hence sole proprietors always face the risk of unlimited liabilities. A person who is the sole proprietor is responsible for all the actions and debts of business.
Due to the risk and danger attached with sole proprietorship for small businesses, they can choose a less risky and limited liability business option with the help of business incorporation. Business incorporation helps people to restructure their business model as a corporation or LLC and they offer a range of benefits to small business start ups.
You can Issue Stock Options
Business incorporation helps you to make stock options available for the employees. At the start of any business journey, most businesses, especially the smaller ones, operate under tight budgets and hiring the right talent can become difficult. Having an option to issue stocks at low price to all those people who you have to pay money can help you in fighting the financial strains that your business is facing.
Investors Prefer Corporations
Investment acts like new blood in the system of any business whether small or large. Therefore if you want further growth of your business then you can do it by attracting more investments. Investors such as venture capitalists choose to work with corporations because then they can operate with different kinds of stocks.
Thus, a business incorporation becomes mutually beneficial for business owners as well as investors.
It provides you with more Credible Business Outlook
Becoming an LLC or corporation as a result of business incorporation helps you to develop a more credible outlook of your business. Having a professional and reliable image is not only an intrinsic reward but it can affect your sales growth positively.
Apart from that, incorporated businesses are more likely to get contracts from larger businesses because they are more comfortable in dealing with established business entities instead of sole business owners.
Easier to Split Ownership
If your small business has more than one partner, then no matter how close you are to each other there will eventually come a time when there might be a conflict over the distribution of equity. However, with the help of business incorporation, you can easily avoid this problem because you are able to split equity by the distribution of stocks. Even if you don’t issue stocks, the paperwork will help you to divide the assets of your company without a conflict.
So, if you have already started your business or planning to do one then make sure that you get benefits of business incorporation.