What You Need To
Know About Incorporating Your Business
Copyright © 2004
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 isnít a move every
business will want to make, there are definitely some large benefits
associated with incorporation.
Incorporating means I canít take money whenever I want it.
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."
Thereís too much paperwork involved once you incorporate. I donít have
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.
The only good reason to incorporate is for personal protection. The
difference in taxes isnít that much.
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.
With the attorneyís fees, the CPAís fees, the additional income tax
returns, and the forms I have to file quarterly, itís just not worth it.
I wonít really save any money.
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.)
Iíll have to hold meetings and keep lots of records that I donít have
time to keep.
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
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 youíre one
of the many who will save 50% off your taxes in the next year, itís
something to go after with a vengeance!
About the author:
Diane C. Hughes *
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