What You Need To Know About Incorporating Your Business

by Diane Hughes © 2003

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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Diane Hughes is an accomplished Internet entrepreneur and
editor of the popular ProBizTips Newsletter. Subscribe to
her newsletter for more tips, tricks, and secrets of the
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