Should You Rely on Online Incorporation Services?

Delineating The Benefits of Hiring An Incorporation Service

If you are currently thinking about starting your own business, one of the most important decisions you will have to make is deciding what business entity structure to go with. There are currently many good options- including Limited Liability Companies (LLCs), Corporations, Sole Proprietorships, and General Partnerships.

All of them have different pros and cons, and the extent that they are suitable to you will be highly dependent on your specificites and industry.

Even though most small business owners tend to register their businesses as Sole Proprietorships (due to the simple process involved), most successful and long-scale businesses register themselves as Incorporated companies (LLCs or Corporations).

Traditionally, the vast majority of small business owners were unable to benefit from the structural, managerial and monetary benefits of incorporation as it was not pragmatically feasible; it would either take too much time (due to the prolific amount of legal rigmarole that needs to be followed), or would require too much capital- as a result of hiring an expensive attorney from a prestigious law firm.

Nowadays, however, the growth of online incorporation services has meant that all business owners- regardless of their prestige and size, can enjoy the benefits of incorporation if they want and choose to. Such services usually handle the entire registration process for business owners at a very affordable price, allowing them to allocate their time in other areas of their business.

Below we will discuss the benefits of incorporating your business, and conclude whether hiring an Online Incorporation service is the most efficacious approach in 2021.

What Does It Mean To Incorporate A Business?

Incorporating your business essentially means that you will register it as a ‘’limited company’’ with your local state’s government agencies.

This distinguishes it as a completely separate financial entity to yourself under the law, and ensures that you can benefit from limited personal liability if your business becomes insolvent in the future or accrues significant debt that cannot reasonably be repaid.

This concept is usually called the ‘corporate veil’; it ensures that all of your personal belongings and assets- such as your house or car, will remain completely off the table to any financiers or lenders that issue claims against your company in the future.

Of course, incorporation is by no means the only favourable option. In fact, the vast majority of small business owners continue to operate as sole proprietorships; having said that, the increased availability of online incorporation service providers has diminished some of the conventional ‘’reasons’’ for not incorporating your business (such as increased time and cost).

Advantages of Incorporated Your Business

Financial Protection:

As already touched on, incorporation allows business owners to be personally protected from any future liability that may arise as a result of insolvency.

This is, perhaps, one of the most significant benefits of incorporating your business as it can give you a certain ‘’peace of mind’’; even in the worst case scenario, your maximum monetary liability is going to be capped to the value of your shares.

Of course, if you have personally guaranteed a loan or a financial statement in the past (such as a credit card application), you will still be personally liable. Similarly, if any tort-related damages arise as a result of your negligent conduct, you will likely be liable for those as well.

Pensions & Funding:

As many Sole Proprietorship owners will tell you, obtaining adequate funding and capital to expand can be extremely hard. This is because they are subject to significantly fewer legal prerequisites, and consequently do not have the same degree of prestige that an LLC or a Corporation business will have.

Furthermore, as through incorporation you can technically label yourself as a W2 company employee, you will be able to benefit from certain tax deductions and pension-related benefits that are not present in unincorporated businesses.

Structural and Managerial Benefits:

Incorporating your business additionally provides you with a plethora of structural benefits. For one, if you are ever interested in selling your shares in a company, this will be very easily done in a Corporation. Contrarily, it can be extremely complicated in a General Partnership (especially if one owner happens to pass away unexpectedly).

Moreover, as an Incorporated business you will have to satisfy certain prerequisites (such as having a Board of Directors for Corporations) which will inadvertently ensure that you structure your day-to-day operations in an efficient and comprehensive way. This can go a long way in expanding your long-term growth.

A Final Take

Overall, incorporating your business undoubtedly has its benefits. Having said that, it is not for everyone. As mentioned in the preamble of this article, your perfect business structure will highly depend on your specific industry (as well as your personal preferences), and consequently you should definitely carry out your own research before making a final decision.