Gain Tax Benefits & Reduce Personal Liability
Corporations provide significant tax benefits and incorporating a business can also help reduce personal liability. Your corporation can pay for business related expenses and deducted 100% before you pay taxes. Your corporation can retain profits at tax rates substantially lower than your personal tax rate (see table). You can save on payroll taxes as a corporate shareholder. You can reduce your Workman’s Compensation insurance by having a corporation. Your corporation can sponsor pension plans that allow you to contribute $100k per year, or more (See Pensions for more info).
There are several different types of corporations:
- C-corporations
- Sub Chapter S Corporations
- Professional Corporations
- Limited Liability Corporations
The type of corporation you establish will be based on the nature of your business as well as your future business goals. For example, certain professions require certain types of corporations be used. Doctors, lawyers, dentists, and accountants must file Professional corporations. If you have a lot of equipment in your business a C-corporation may be most beneficial. If you have multiple partners then a Limited Liability Corporation may be a good option. The best type of corporation will be determined through private consultation.
Corporations can help reduce the personal liability you have as a business owner. The corporation takes the primary role of “owner” of the business as well as many of the liabilities of the business’ operations. In theory, if someone is injured while working for the corporation it will be the corporation, not the shareholder, who is responsible. This adds a layer of protection between injury claims and your personal assets.
You will have to file an additional tax return for your corporation. We strongly recommend that you use a professional bookkeeper to assist with the regular accounting of your books and records. This will help you measure your corporations revenues and expenses, boost the future value if you decide to sell your business and make tax report simple for you and your CPA.
Many sole-proprietors think they aren’t big enough to be a corporation yet. Our response is that if you are serious about your business and you have revenues, then you should consider incorporating. Professional Planning Associates can help you through the incorporation decisions, process and benefits. If you have a viable business now is the time to get started and enjoy the benefits of incorporation.
For more information about the Benefits of Incorporation, we invite you to take a look at the following comparison chart:
To meet with a professional advisor so you can benefit from incorporating your business please Contact Us by phone or email.
5830 Oberlin Drive, Suite 304
San Diego, CA 92121
Phone: 800-731-8122
info@proplanusa.com