The Benefits of Incorporating a Business
Incorporating a business means you are creating a separate legal entity that functions apart from its shareholders and owners. As the owner of your business, your name is tied to all matters of your business – unless you incorporate. Allowing your personal identity to remain as the main face of your business puts your personal life at risk of being damaged should your business face any sort of litigation.
Incorporating a Business provides Personal Financial Protection
Your California business attorney will tell you from the start of forming your own business that you are allowing your personal assets to be tied to that business. This means if you enter any sort of litigation such as premises liability or defective product claims, your own assets – money, property, investments – may be seized as part of the settlement should the judge rule in favor of the plaintiff.
By incorporating a business, the owner can protect their personal assets from being considered a part of the business. Therefore, any lawsuits brought against the company will only be able to affect the business and not the owners or shareholders.
Financial Advantages of Incorporating a Business
When you go about incorporating a business you are gaining many perks in the financial realm. Corporations and LLC profits are exempt from Social Security, Medicare, Workers’ Compensation and other taxes, resulting in more than 15% in saved taxes. These are known as “self-employment taxes” and are levied on all income earned by the business, except when you incorporate where only salaries are subject to these taxes.
Corporations can also deduct business operating losses and have greater flexibility in operating and capital losses. Other perks include being able to set up a 401(k) that allows you to exclude a higher amount of income than a regular IRA. Corporations may also deduct 100% of the health insurance premiums paid on behalf of an owner-employee, auto insurance, education benefits and life insurance. They also generally face fewer IRS audits than individually-owned businesses.
Hiring a California Business Attorney
Incorporating a business involves paperwork, deadlines and can be a hassle, especially when dealing with other aspects of your business. When incorporating a business, you should seek the help of an experienced California business attorney. Establishing a good relationship with your attorney early in the life of your business can help tremendously should you need help with other aspects of business law in the future.
The California business attorneys at the ADLI Law Group P.C. serve local clients across Los Angeles County and international clients including those from Europe, the Middle East, and Asia. Contact us today for experienced help with securing your personal assets by incorporating your business – 800-817-2949.