5 Reasons Why You Should Incorporate Your Business

After spending much time, capital, and effort, your small business is booming. You might start to wonder, “Is it time to incorporate my business?” While it is true that incorporation of company is more complex and has more obligations than a sole proprietorship, there are many advantages to incorporation.

What is incorporation?

Incorporation is when a business owner registers their company to form a corporate entity that separates the business’ assets from its owners and investors. Corporate entities are often identified by using the term “Inc” or “Limited (Ltd.)” in their names. Businesses in Singapore may register their company with ACRA 

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What are the benefits of Incorporation of Company?

1. Provides liability protection

Did you know that only 33% of SMBs and new businesses get to celebrate their tenth anniversary? This means most companies will likely fail and not survive. If this happens and your company is incorporated, you will only lose the amount you have invested in the business. As opposed to a sole proprietorship, where your personal assets can be seized to pay off the debts of your business. 

2. Ensure business continuity

Incorporating your business means that your Board of Directors can continue business activities in the event of one’s death or withdrawal. They can hold a meeting to appoint a successor immediately. This line of continuity cannot be said for sole proprietorship businesses.

3. Gain tax incentives

One of the benefits of incorporating one’s business is getting tax incentives. While it is true that corporate tax regulations vary, most offer better deals for corporations to attract businesses and provide employment opportunities. 

In Texas, for instance, there is no income or corporate tax applicable. While in Singapore, sole proprietors are taxed at 22% for personal income compared to the corporate tax rate, which stands at 17%.

4. Enhance your company’s image

Would you be willing to invest in a new business with no legal standing? Most likely, you would be wary and have some hesitation. By incorporating your business and becoming a legal entity, investors and customers are more likely to trust you. It can also increase your brand awareness and make it easier to get funding from bank loans, angel investors, or venture capitalists.  

5. Better decision making and management

The decision-making process is centralized when you incorporate your business and are no longer a one-man operation. Usually, it takes a vote of the Board of Directors to make big decisions. This minimises the risk of one party making a mistake due to bad influence or advice. Voting ensures a democratic consensus of what is best for the company.

As you can see, incorporating a business gives you many advantages compared to having a sole proprietorship. While you may think that incorporating a business is complex and time-consuming, it is not. Nowadays, it can be done online and only takes a couple of minutes of your time.

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Still unsure on how to incorporate your business properly? Let Lanturn help! 


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