Why Incorporation is Recommended for your Design Business

While incorporation isn’t required for a design business, it is highly recommended. It offers protection for the owner of the business. Too much has been invested both in terms of time and money to see it all go down the drain due to a lawsuit.

Limited Personal Liability

The owner of the design business will have limited liability should there be a lawsuit or the business has to file for bankruptcy. While no one wants to think about such scenarios it does happen all the time. With limited personal liability, the business is separate from your personal finances. If there is a problem, the business owner won’t be at risk of losing assets including their vehicle and their home.

Tax Break

When a business is incorporated, they get tax breaks. That can really make a difference regarding how much you have to pay to the government over the course of the year. As your profits grow, that tax break benefit will continue to increase. The result is that you get to keep more of what you earn as profits rather than giving it to the government. There are differences with C corporations and with S corporations that need to be looked at. Evaluate the pros and cons so that you can determine which option is best for your business needs.

Name Recognition

Part of successfully operating a business is for it to have longevity. Name recognition occurs as consumers become familiar with the name and the logo of the business. Incorporation allows the business to have unlimited life so that the name recognition can remain in place. The exception to this is if the business closes or if the business merges and a name change occurs. A business that has been incorporated can have a life that spans many generations, and even decades.

Legal Protection

There are particular laws that cover businesses that are incorporated. When you aren’t incorporated, you are more vulnerable. With the legal precedent in place, owners and managers have a blueprint to help them. This can result the risk of difficult and tricky situations occurring within the business over time.

Shares can be Transferred

If there are several owners, the shares that they own can be transferred to someone else. For example, they may be given to family members. They can also be sold to other individuals as well should a particular owner die, wish to reduce their percentage of ownership, or wish to bring in another owner to be part of the business.

Capital can be Raised

If you would like to grow your design business, it may be necessary for you to get some investors on board. The process of incorporating allows you to raise capital. Such investors will find the business to be attractive too due to the limited liability and the fact that shares can easily be transferred. Selling securities through such a method can help to generate income for expanding the business so that it can become more profitable as it grows.