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                        Four Myths About Incorporation
Steven Lemon
6 Dec 2012
 

Myth #3 Corporations are expensive to start, expensive to run

The premise, in my opinion, for starting a business is to earn a profit. Whether an LL

C, C or S corporation or a sole proprietorship, you want max profits for the owners (YOU?).

The only reason for a lot of paperwork s that you are making big bucks. So what's the problem?

Delaware No Longer Corporation Central

There was a time, not so long ago when almost every major corporation in the country was incorporated in Delaware. The reason was not so much about the relative cost but the ease of which the process cold be completed. While researching a project for prospective client I discovered that not only is Delaware not the least expensive anymore, but it is not that much simpler to incorporate in Delaware than anywhere else.

Myth #4. My company is too small to incorporate.

And as long as you remain Unincorporated it will STAY small.

The fact is, there are major advantages of incorporation available to companies of ANY size. One main benefit of incorporating is the ability to protect personal assets, but there are others:

  • As a corporation you can raise money from investors,

  • The most you can lose is what you have invested in the corporation. Even then you deduct this capital gains losses your personal income tax return.

  • you can deduct certain insurance and medical premiums for key personnel,

  • you can select to be taxed as an 'S' corporation, which allows your corporate profit to be reported on your personal return,

  • you can deduct part of the cost of vacations, and other personal projects as long as a certain amount of business activity occurs during the trip. If you can't take advantage of that one you need to hire a consultant who can fill you in. t is all legal, of course.

  • Adding an INCORPORATED tag to your business name adds a certain degree of prestige even to a one man operation.

Of course you should consult your tax adviser for details in your area, but it is my considered opinion that it is virtually impossible for an unincorporated company (unless it is an athlete, a politician or a drug dealer) to earn a million dollars, which used to be the low water mark for economic success. A business owner with the true grit who wants not only to survive in his or her field but to dominate it has to be talked OUT of incorporating. Those who don't have that drive and ambition must be talked into it.
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