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Advantages of
incorporating your business. |
| Forming a corporation or LLC can be a big
step towards your success and the success of your business.
There are many benefits of forming a corporation or LLC that
are not available to sole proprietors or partnerships: |
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| Protect your Personal Assets |
| The primary reason many businesses form
corporations is to protect their personal assets. Without
setting up a legal entity for your business, like a
corporation or LLC, your personal liability for business
debt is unlimited. This means that should your business
experience severe financial difficulties, creditors can take
away your personal property such as your home, retirement
savings, or any other asset you or your spouse own. Forming
a corporation or LLC for your business can protect your
personal assets. |
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| Save Money on Taxes |
| If you are operating as a sole
proprietor, you will be required to pay self-employment tax
on your profit, currently at 15.3%. If you set up a
corporation for your business, only the salary you pay
yourself is subject to self employment tax. With an
S-Corporation, the remainder of the profit is not subject to
self employment tax, saving you money. Another tax benefit
of forming a corporation is that select medical and
childcare costs may be deductible, which cannot be deducted
as a sole proprietor. |
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| Reduce your Chance of a Tax Audit |
In recent years, the IRS has audited a
much higher percentage of sole proprietor tax filings than
corporate filings.
In tax year 2005, a Schedule C filer stood a 1 in 33 chance
of being audited. For S-Corporations (or LLCs filing as
partnerships), the odds were around 1 in 300. This means
that you are almost ten times more likely to be audited if
you are a sole proprietor! |
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| Look and Feel Professional |
| Putting "Inc." or "LLC" after your
business name can give you credibility with your customers.
Corporations, LLCs, and other legal entities can be a sign
of credibility, professionalism, and trust. |
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| The
Secretary of State of North Carolina publishes a guide
to incorporating your business in North Carolina. You can
download the guide by clicking
HERE. You can incorporate your business yourself and can
even do it online. |
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