Operating a small business as a sole proprietor does have a few advantages. It requires less paperwork and may simplify your monthly accounting. However, there are some significant drawbacks, including personal liability for business debts and, in some cases, higher taxes. Below are a few reasons the business consultants at Lee & Smith, PLLC in the Texarkana area urge entrepreneurs to incorporate their companies.

5 Key Advantages of Incorporating a Small Business

1. Protection for Your Personal Assets

Sole proprietors are personally responsible for their business debts, which puts everything they own at risk if things go wrong. Establishing a corporation or LLC substantially limits this risk, protecting your assets if the business is sued or goes bankrupt.

2. Legitimized Operations

A corporate title seems more credible and trustworthy to businesses and customers than a simple DBA. Even if you’re a trusted provider in the local market, having the official business title can go a long way toward enhancing your legitimacy.

3. Something to Pass Down

As a separate legal entity, LLCs and corporations continue existing after the individual who started them passes away. As part of incorporating, a business consultant can help you establish a succession plan that ensures the company lives on.

4. Better Tax Rates

Both LLCs and corporations give you access to different tax structures, which may be more favorable, depending on your circumstances. You may decide to report revenue as personal income or pay the corporate rate and compensate yourself through dividends. A business consultant can identify the best tax structure for your needs, potentially slashing your liability every year.

5. Attracting Investors

Investors generally won’t put money into a sole proprietorship, no matter how solid the business plan might be. If you’re planning on growing a business, incorporating can help you access the capital to expand.

For nearly 30 years, the business consultants at Lee & Smith, PLLC have provided quality advice and reliable accounting services to entrepreneurs throughout the Texarkana area. Over the years, they’ve worked with clients in almost every industry, providing the insight and financial tools they need to succeed. To learn more about the advantages of incorporating a business, visit their website or call (903) 832-4339.