When you are forming a new startup, one of the considerations is whether you should incorporate. Let’s take a look at some of the reasons you may decide this is a smart move for your small business.
- Tax savings – A sole proprietor will pay 15% in self-employment tax on all taxable income. Therefore, you may want some of the funds to stay with the corporation and pay yourself a salary. This will help you to budget and will provide some tax benefits.
- Business investment – Rather than having to sink money into your business from your own accounts, you can use retained earnings to help grow your business. This will further help to reduce taxes, as that money can become a business expense rather than personal income that gets taxed and then poured back into the company.
- Separate personal and business assets – This is essential if you have any business debt. You don’t want the company’s creditors to come for your personal accounts, house, or car if you default.
- Retirement savings – Corporations can set up a 401(k). You can save some of your own income and match it with the business (usually up to a certain percent of your income or a particular dollar amount per year). This will allow you to grow your 401(k) faster and to be ready for retirement at an earlier age.
An Affordable Small Business Attorney to Help Form Your Corporation
The paperwork side of things isn’t as bad as you might think, and Pokala Law APC is here to help you every step of the way. Learn more about our affordable services for small business owners by calling 1.844.695.1487, or you can request an appointment online.