Expert Interview Series: Deborah Sweeney on The Importance of Incorporating a Small Business
Are you a small business owner? Have you given any thought to incorporating your business?
If you haven’t, you should. According to Deborah Sweeney, CEO of MyCorporation, incorporating your business can benefit you greatly.
Recently, Franchise Gator spoke further with Deborah about why you should incorporate your business – and what it takes to get the job done.
Why is it so important to incorporate a small business?
Incorporating has so many benefits for small business owners. Some of them are:
1. Lowering taxes
2. Protecting your personal assets by legally separating yourself from the business
3. Adding a sense of legitimacy to your business so customers know they’re dealing with a reputable, legal business
Additionally, incorporating can be great for raising capital because you have the ability to sell stock. You can raise money for your business by selling stock and avoid starting your business with a huge amount of debt as you might if you took out a decent-sized loan.
Are there any mistakes that are common for businesses during the incorporation process?
Unfortunately, it’s pretty common for new small business owners to try and incorporate their businesses on their own without using a service or any legal help in an effort to save money. There’s a lot of paperwork that goes into filing a business with the state; and unless you’re an expert, mistakes are bound to be made. These could cost new business owners a ton of extra time and money – which are two things that they don’t have much of.
One of the biggest mistakes we see is when there’s a partnership involved. If there is more than one owner of the Corporation or LLC, it’s important to have a partnership agreement in place. It is important to spell out ownership interests, distributions or salaries, and responsibilities, including the process for closing or selling the business should that arise. Communication and organization in the business start-up process is key.
When you do your free startup consults, what kinds of problems are commonly uncovered?
One of the big questions we get is "Which state should I file in?" Though we can’t give legal advice, we keep our blog and learning center on our website stacked with helpful information so new small business owners can have all that material readily available to them and feel comfortable making an informed decision. There’s a lot to consider when choosing which state to file in, such as the cost of foreign qualifying if you’d like to do business in a state that’s not the one you reside in, the economic health of a state, and the small business friendliness. Delaware, for example, is known as "The Incorporation Capital of the World," because it doesn’t have a corporate income tax and maintains such a modern corporate climate.
What specific success stories have come from moving through the incorporation process, and what have been the benefits to that particular business?
We recently helped a business, Auden Jewelry Design, with their S Corp election. They were looking to protect personal assets and save on taxes. The owner elected an S-corporation status and put himself on the payroll, allowing him to benefit from tax savings. Auden Jewelry Design has saved a significant amount on tax savings, helping them to organize their income in effective ways focused on growing the business.
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About the author:
Joe Ruiz is an author, podcaster, MBA graduate and marketing professional. He writes on a variety of topics including business, leadership, news, and politics.