5 Reasons For Consultants to Incorporate Now!

When you form a corporation you are creating a tax entity that is separate from your personal self, and separate from your personal assets. The corporate entity is like another person the IRS will tax in certain ways, and is also something that can be taken to court by someone pressing charges in a court of law.

Creating a corporation is a very smart move for many reasons. Money is one reason you should incorporate. A corporation can make money that it doesn’t pay you… and you can pay yourself only what you need to survive, not more. In this way you can save a lot of money on taxes each year.

Incorporating your new business has a number of positives that you won’t want to pass up.

5 Best Reasons to Incorporate as a Consultant:

1. Saving Cash

As I mentioned… you can save quite a bit of money at the end of the year just by paying yourself only what you need. That money will be taxed, and the money that stays in your business checking account is not taxed – depending what type of corporation you choose. Chances are good that you can save money on taxes at the end of the year too – hire a good accountant that is very familiar with business tax deductions and you’ll be happy you did.

2. Less Responsibility

If you’ve been living in a box for some time and you feel quite safe about consulting without being protected by a corporation, let me assure you that many court cases are conducted where consultants are sued for something they did. If you are not incorporated and didn’t follow strictly, the rules for keeping business and personal finances separate – the court may be able to easily pierce the corporate veil and take your personal possessions if you are sued. Creating a corporation and following very strictly the rules about keeping all finances separate – is the right thing to do. You owe it to yourself to stay safe. You owe it to your family as well, don’t you?

3. Less Audits

One thing that flags the IRS to audit businesses is when they are sole proprietors and haven’t incorporated. The IRS knows that many people intentionally defraud the IRS by claiming to have a business, and deducting many expenses, when in fact – they don’t have a business at all. If you don’t incorporate you may have to deal with more IRS audits than someone who took the simple step to incorporate.

4. More Respect

If you don’t have a corporation, then, in many persons eyes, you don’t have a business at all. It is a bad reflection on your business, and it won’t likely be taken as seriously as would a company with “Inc.” behind their name. Without incorporating the message you’re sending to the public is that either your business is not really valid, it’s a front for something, or you don’t really know enough to understand that you have to protect yourself from liability as much as possible by incorporating. By incorporating, you are adding credibility to your business and showing the world you are taking it seriously. Lending institutions lend more often to incorporated businesses than not. If obtaining funding is important to you, then incorporation is a must.

5. Cheaper Health Insurance

If health insurance is important to you, in all likelihood, you will be able to find cheaper health insurance once you incorporate.

As a consultant you are rather unprotected in the business world. By incorporating you can accomplish many things, one of them being creating some distance between you and your company in the case of litigation. If the corporate veil is pierced you’re in for a lot of grief. Save yourself the grief by taking a couple hours today and reading about incorporation and which type might be best for you. Most consultants find that the LLC – Limited Liability Company is the right one for their consulting business. Many incorporate their name, like, “Joe Dooda, Inc.”

You really shouldn’t need more reasons than those mentioned. Go incorporate your consulting business today!