Tax Advantages of Incorporating a Business
by Stephanie Hetu
Published on this site: February 13th, 2006 - See
more articles from this month
The tax advantages of incorporating a business is one of the
main reasons that owners choose to incorporate their businesses,
no matter what market they work in. Other types of businesses,
such as sole proprietorships, are not afforded
nearly as many tax advantages as an incorporation.
A move called income shifting is one that helps the business,
and its owners, immensely. This is a method in which the total
income of your corporation is divided among its members. How
does this help, you might wonder? By shifting the income to
a number of individuals, the overall tax that is required
to be
paid on it can be significantly lower, which is a great tax
advantages of incorporating a business.
Being able to offer a greater amount of fringe benefits also
factors into the tax advantages of incorporating a business.
This is from the fact that other types of businesses don't
get as much of a tax deduction on such things as medical and
retirement plans. In some cases, you can get a full exemption
as long as you choose the proper plans.
Another tax advantages of incorporating a business is that
of making your business a completely separate entity. This
saves you from liability with your personal assets in case
your business gets in trouble, as well as allowing you to
structure your business to take advantage of your business
income and lower tax rate. There are also many deductibles that you simply
don't get when you have a sole proprietorship or partnership.
While you don't want it to happen, business losses can occur.
With an incorporation, you are entitled to an unlimited about
of business losses, as opposed to the very stringent requirements
for other structures of business. These are the main tax advantages
of incorporating a business, and ones that you will want to keep in mind when deciding whether or not
you want to incorporate your business.
Income delegation is another great aspect of incorporation.
You can state when you receive income yourself, as opposed
to income towards your business. This is a great way of keeping
your income tax for both your personal and business selves
down low, and is a huge reason to incorporating for small
business.
You can also receive a small business tax deduction. This
comes from incorporating for small business, and is 16% on
your first $200,000 in profit, which may or may not be lower
than what you are paying from your personal income taxes.
It is definitely something that should be looked into, however.
Stephanie Hetu is a LLC the best option for your business?
Find out at http://www.LLC-Explained.com
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