Many businesses start out small, with an entrepreneur that has plenty of passion, perseverance and energy.
Bookkeeping Basics – Some are more risk-takers than others, but in the end most business owners share similar personality traits. Most entrepreneurs don’t think about their long term plan in the first few years, especially when they have a small business and no partners to answer to. Instead, the focus is on breaking even, growing their product and/or services offering, reinvesting in their business, and wish for the best.
Future entrepreneurs enjoy being on their own, feeling a hug senses of satisfaction and accomplishment. For service-based businesses such as freelance writers or marketing consultants, the trend is to operate as a sole proprietor which in bookkeeping basics world, that means these freelancers’ profits are taxed on their personal tax return. But for small businesses that carry inventory, equipment or machinery, an office space or storefront, incorporating may be a better way to go.
Bookkeeping Basics Reason 1: Protect Yourself From Creditors
By incorporating your business, you’re putting a wall between you the person, and your business. They become two separate entities, where one doesn’t really affect the other. This liability firewall further protects you from legal claims, should there be any in the future. You’d be surprised to find out how often this happens, and many times uncalled for. The separation between you and your business becomes even more important as you grow older and amass more personal assets like a boat for example, and more responsibilities like family.
Bookkeeping Basics Reason 2: Instant Credibility
If you want to be taken seriously, a little structure and formal paperwork helps. In some industries, a formal entity is expected in order to win contracts. Incorporating yourself will also add a level of privacy, the registered agent goes on record not your personal home address. Your invoices, checks and letterhead will now all have a business name versus your own. This all translates to more credibility and helps you grow your reputation.
Bookkeeping Basics Reason 3: Potential Tax Benefits
In some cases, corporate tax rates are lower than individual tax rates so you may benefit from paying less to the IRS and who doesn’t want that? Corporations can qualify for additional deductions, leaving you more money to reinvest in your small business. But remember that you’ll probably have to keep up with keeping track of records and filling. But don’t worry because you can always outsource your bookkeeping services to Your Bookkeeping Department.
Bookkeeping Basics Reason 4: Allows You To Get Funding
If you’re going to ask for extra capital in the future, or even try to get a small business loan, a formal business corporation is always better since you’ll need to provide credit. Venture capitalists, banks, even angel investors that rather not be part of your day-to-day operations, rather work with businesses that have established credit. If you don’t incorporate your business, you’ll have to count on your own personal credit to get extra funds.
So how do you incorporate a small business in Florida?
Florida is one of the most popular states for incorporation, since it’s home to the fourth largest population in America. Once you’re ready to incorporate and know your preferred business structure, you’ll need to file some documents and articles of incorporation with the state of Florida. The state charges a base fee for the filing and registered agent designation, but you may have additional fees with the Florida Department of State Division of Corporations.
For more guidance on how to incorporate your business, contact Manal Oliver at Your Bookkeeping Department.