Starting a Business

Why It Matters To Incorporate a Business

Why should entrepreneurs incorporate a business?

There are several benefits which come with incorporation. Entrepreneurs can choose if they want to create a corporate business structure or not. Generally, however, we recommend it. Let’s look at some of the long-term benefits of incorporating a business.

Incorporation Offers Limited Liability Protection

The good news about incorporating a business is entrepreneurs receive limited liability protection when they do it.

Small businesses start out under the sole proprietorship. This is their default entity formation. A sole proprietorship is an affordable entity. Little paperwork is required for a sole proprietorship. The owner assumes responsibility for all aspects of the business. However, they do not receive limited liability protection.

Under an incorporated entity, limited liability protection creates a separation between the assets of the business and its ownership. Unincorporated entities like sole proprietorships do not receive this protection. As a result, their personal assets — like houses and cars — may be at risk in the event of an unforeseen circumstance.

Which entity offers limited liability protection? The good news is almost every incorporated entity offers this benefit. This includes LLCs, corporations, S Corporations, C Corporations and benefit corporations. Entrepreneurs who would like extra protection when running a small business may consider incorporating. Then, they can choose the entity which best fits their needs.

It Helps Establish Credibility

Small businesses need to establish customer trust. Customers who trust in the business are more likely to shop and do business with the company and spread positive word of mouth. An incorporated business can make all the difference in deciding which company a consumer should do business with and trust.

For example, let’s say a customer is choosing between two small businesses to shop at. One has “LLC” in their name since they are an incorporated business. The other does not have any documentation proving they have incorporated.

The customer is more likely to choose the business with the word “LLC” in its name as their shopping destination. By incorporating a business, small businesses can quickly establish a professional identity. This helps prove to customers the business is legitimate. They feel good about doing business with your company and trust the overall business.

You’ll Be Able To Attract Investor Interest

Most business plans drafted by entrepreneurs include a financing request. This is a document where entrepreneurs may request additional financing from interested investors.

The only problem? Many investors are hesitant to invest capital in businesses which have not been incorporated. An unincorporated business is often a red flag to investors. They may decline to invest in your business. Incorporated businesses, on the other hand, are less likely to run into this specific issue with investors. They may have an easier time attracting investor interest and receiving funding for their small business.

Are You Ready To Incorporate Your Small Business?

We can help you get started! Contact us at mycorporation.com or give us a call at 877-692-6772. Our team of professionals can walk you through filing to incorporate as a legal entity and answer any questions you have about what it means to incorporate a small business.

Once you understand what it means to incorporate a business, you may give your small business the legal protection it deserves.

Deborah Sweeney

Deborah Sweeney is an advocate for protecting personal and business assets for business owners and entrepreneurs. With extensive experience in the field of corporate and intellectual property law, Deborah provides insightful commentary on the benefits of incorporation and trademark registration. Education: Deborah received her Juris Doctor and Master of Business Administration degrees from Pepperdine University, and has served as an adjunct professor at the University of West Los Angeles and San Fernando School of Law in corporate and intellectual property law. Experience: After becoming a partner at LA-based law firm, Michel & Robinson, she became an in-house attorney for MyCorporation, formerly a division in Intuit. She took the company private in 2009 and after 10 years of entrepreneurship sold the company to Deluxe Corporation. Deborah is also well-recognized for her written work online as a contributing writer with some of the top business and entrepreneurial blogging sites including Forbes, Business Insider, SCORE, and Fox Business, among others. Fun facts/Other pursuits: Originally from Southern California, Deborah enjoys spending time with her husband and two sons, Benjamin and Christopher, and practicing Pilates. Deborah believes in the importance of family and credits the entrepreneurial business model for giving her the flexibility to enjoy both a career and motherhood. Deborah, and MyCorporation, have previously been honored by the San Fernando Valley Business Journal’s List of the Valley’s Largest Women-Owned Businesses in 2012. MyCorporation received the Stevie Award for Best Women-Owned Business in 2011.

Recent Posts

Digital Marketing Strategies to Help Your Business Win in 2025

With every new year comes new challenges and new opportunities for your business. 2025 is…

1 day ago

Understanding New Tax Laws and Regulations

There have been many articles and news outlets discussing the change in tax laws and…

1 week ago

How to Hire and Keep Great Employees: Our Hiring Guide for Business Owners

You can’t scale a business without employees. And you can’t operate effectively unless you have…

4 weeks ago

How and Why To File a PLLC (Professional Limited Liability Company): Our Guide for 2025

If you own a business for a licensed occupation, you may already be familiar with…

1 month ago

How to File a DBA in California: A Step-by-Step Guide for Your Business

Started an LLC or Corporation in California but need to change the name you are…

2 months ago

What a Trump Presidency Means for Trucking Companies

businesses across various industries are preparing for potential shifts in policy. For truckers, these changes…

2 months ago