02.19.06
What You Need To Know About Incorporating Your Business
Most US-based small businesses are getting eaten alive in
taxes! That statement has proven itself true over and over
again. However, while small business owners want to save
money, many are literally afraid of incorporating their
companies. The paperwork, the additional reports, having a
set payroll amount each month, and other visions swirl
around their heads. Those visions could be costing you a
ton!
Let me take a few minutes to explain what you need to know
about incorporating your business. While it certainly isn’t
a move every business will want to make, there are
definitely some large benefits associated with
incorporation.
MYTH
Incorporating means I can’t take money whenever I want it.
TRUTH
Yes you can! This is a MYTH that holds a lot of small
business owners back from incorporating. If you set a
payroll amount for yourself, then decide you want/need more
money, you simply write yourself another check and call it
an “owner distribution” or a “draw.”
MYTH
There’s too much paperwork involved once you incorporate. I
don’t have the time.
TRUTH
There are some additional forms you have to complete. There
are some additional taxes you have to pay. HOWEVER… read
this carefully… for the three or four extra forms and the
cost of the additional taxes, most businesses will still
save when compared to counting every dollar you make toward
personal income.
MYTH
The only good reason to incorporate is for personal
protection. The difference in taxes isn’t that much.
TRUTH
While incorporating your business will help protect you
from lawsuits and from having your personal property
seized, there are more benefits than that. The tax savings
can be quite significant.
MYTH
With the attorney’s fees, the CPA’s fees, the additional
income tax returns, and the forms I have to file quarterly,
it’s just not worth it. I won’t really save any money.
TRUTH
Every case is different; however, most small businesses
will more than make up the $1500 - $2000 it costs to
incorporate within the first six months to one year. Also,
most small businesses will save about 50% on taxes after
they incorporate. (A qualified CPA will be able to look at
your books and give you a more accurate figure.)
MYTH
I’ll have to hold meetings and keep lots of records that I
don’t have time to keep.
TRUTH
Not if you register as a “closed” S-Corporation. This means
you have waived the requirement to hold all those meetings
and keep all those records.
How Do You Get Specific Details?
Contact a qualified CPA in your local area. He or she can
give you detailed information on how much it will cost to
set everything up, and - most importantly - how much you
will save in taxes.
Incorporation is not something to be afraid of. In fact, if
you’re one of the many who will save 50% off your taxes in
the next year, it’s something to go after with a vengeance!
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