If you are the sole owner of a company and you do not have to regularly hire help, staying a sole proprietorship is the easiest way to run your business. If your business is growing or if you need to have any type of business insurance, you may want to switch to a different type of company. When you are looking at insurance plans, it is also a good idea to look at corporation business types that can better protect your company. Here are a few things you should talk to a business law professional about when incorporating your sole proprietorship.
How long are you personally liable?
If you are operating under your own name as a business, you may be personally liable for past results. Being a sole proprietorship means that you are entitled to all monies that your business makes and that you are responsible for any mishaps. Talk to a business lawyer to determine when your incorporation and incorporated business insurance kicks in. You may still be held personally liable for any issues that happen with clients while you were operating under your own name, but you may be able to use your business insurance beginning immediately.
What do your tax changes look like?
With an incorporated business, you will need to set up a new payment structure for your company. You may decide to take home a paycheck from your company every two weeks or issue yourself a monthly stipend. No matter what payment structure you decide on, a change from a sole proprietorship means that you will have a different tax structure. If you now need to file business taxes, you will need to know the rules and regulations of what you can do with the money that is considered business income. Figuring out ways that you need to change your company income and spending habits will make the upcoming business tax season easier.
What state(s) should you register in?
As a business owner, have the option on where to incorporate your company. If you do business in a number of different states, you should take a look at where most of your business comes from and the rules of business law in that state. Bring all of your current business information to your business attorney so that they can advise you on where and how to file articles of incorporation and receive a business license.