Is it time to incorporate?

If you have started your own business and operate independently, you might want to consider incorporation. When you take this step, you create a company that is legally separate from you, which helps prevent any personal liability claims from affecting your efforts.

Incorporation is convenient for a variety of reasons, including the tax benefits that come with the new legal title. If your incorporation structure is in place and you generate a high enough revenue stream on a yearly basis, you can save thousands of dollars by taking the appropriate steps to establish your business in the marketplace. You might find that when your competitors ask you how you allocate so much to promoting your products and services, you'll be able to respond with "marketing my business is only made possible through incorporation."

Here are four ways to incorporate.

1.) General corporation – This structure is the most common way to establish large companies. This process creates a legal entity owned by an unlimited number of stockholders, all of whom are shielding from debts accumulated by the business.

2.) Close corporation – This method has a small number of shareholders. The people included in this small population don't hold any stock in the company, but are active participants in the management of the business.

3.) Limited Liability Company (LLC) – An LLC is formed when a business files articles of organization with the proper authorities. LLCs are open to certain liabilities and are rewarded with unique tax benefits. For example, an LLC acts like a partnership to prevent double taxation.

4.) S corporation – This structure provides similar benefits of incorporation, and eliminates double taxation. Business owners are only taxed when profits come in, not a second time when a portion of that revenue is repurposed as income.

Before you incorporate, make sure it's right for your business. In most cases, you should contact a legal adviser to provide further advice and guidance throughout the process.