When making the decision to incorporate your business, you want to think about what it will look like to run your business. Ultimately, one of the best reasons for incorporating your business is because it keeps your company and its assets separate from your personal ones, but there are great advantages when it comes to the big “T” word too.
Here’s a list of the top 6 tax advantages you receive from incorporating your business:
1. Spreading Out Tax Losses
As a business, you’ll likely have some losses, especially at first — most businesses do. Unlike filing your taxes as an individual, a business can spread out their tax losses over time. As an individual, you’re forced to take the loss right away, but as an owner of an incorporated business, you can defer your taxes.
2. Business Expense Deductions
Keep track of all your costs. This includes start-up costs, operating costs and capital expenses (land, business equipment, commercial property, etc.). These expenses can be deducted during tax time and can add up to big money for your business. And as a bonus, you’re at a lower risk of being audited as an incorporated business.
3. Social Security Tax Deductions
By incorporating your business, you’ll only have to pay social security taxes on the income salary that you personally receive. This saves you a big chunk of tax money and allows you to separate your social security tax from your entire business income.
4. Benefit Deductions
Incorporated businesses are able to deduct the benefits they pay their employees too. As an unincorporated business who has outside people helping you, you’re unable to deduct those benefits/.
5. Protect Personal Assets
It’s always a wise idea to keep your business and personal assets separate. This includes bank accounts, property, etc. As an incorporated business, you’re able to protect your personal assets — it’s critical to have this asset protection in the unfortunate case that something goes wrong in your business.
When your business is incorporated, you’re more likely to be taken seriously as a business owner. You become more credible in the community and in the tax world. When that’s the case, you’re more likely to earn money from people who trust you and your business.
The Bottom Line on Incorporating
Incorporating a business might be a great choice for you. In addition to tax advantages, incorporating your business opens up many doors and opportunities.