What are the advantages of converting your business into an incorporated entity? Should you form a corporation or should you continue working as an individual? What are the pros and cons?
You may not admit it to be true but there is no denying that forming a corporation and proclaiming yourself as the managing director of your business is a cool status symbol. Running a business as an entrepreneur seems like a task. Calling yourself as managing director seems like a status.
At the end of the day, you may not be doing anything different but the change in perception of outsiders and friends and relatives will have a huge impact on your performance. However, this status symbol does not come cheap. For starters, you will have to complete the formalities of converting your business into a corporation.
You will have to carry out additional tasks like registering with the Internal Revenue Service, relevant regulatory authorities in your state and compliance with other laws. One reason why people skip the idea of incorporation is the change in tax burden. You are probably paying income tax out of the total revenue that you generate out of your business.
Once you become a corporation, you will have to follow the tax slab that is applicable to companies. Further, you will have to complete certain other formalities and the process of maintenance of books of accounts may change. This can complicate matters and many people prefer keeping their business uncomplicated.
Another factor that you should consider when converting your business into a corporation is the initial cost involved. You will require the services of various professionals for compliance with the legal aspects. Such services do not come cheap.