Working from Home and Incorporation

When choosing a legal structure for your working from home business, it is best to look at the advantages and disadvantages of each one, and weigh your options to see which one will benefit you the most. Although incorporating a business will protect you from liability, and give you more flexibility to merge with other companies, there are some disadvantages worth considering before diving in.

 

Unless you own a large working from home business, it may be difficult to maintain the strict requirements to address in order to keep in good standing as a corporation. Certain staffing, accounting, and legal requirements may be too much for a business owner to keep up with alongside of the many other daily duties required in order to keep a business running smoothly.

 

The main reason a person may back away from incorporating a working from home business involve the time it takes, the amount of money that it costs, and the extra load of paperwork involved. However, the main reasons people do not incorporate is because of double taxation. First the company is taxed on its initial profit, and when the shareholders get their profits distributed, it is taxed again.

 

Another drawback in incorporating is that it is separate from your personal finances. Being that it is separate, it means that you cannot dip into the working from home business funds if you run short one week for any reason. With the already strict requirements involved, and the initial start-up cost, this may be too overwhelming for a small business owner to deal with.

 

If you are not sure about whether or not to incorporate your business think about the nature of your business, and the goals you have for it. Then look up what the specific requirements would be in the particular state you are going to conduct business in. If it all seems to overwhelming, maybe you should consider other types of legal structures available to you in your state.

 

One reason to consider making your working from home business a corporation is the ease of selling it. In a sole proprietorship every asset has to be transferred individually, and new licensing is required to keep running, whereas running a business through a corporation the whole thing can be sold or transferred with ease, and with avoiding cutting through ‘red tape’. To go along with all the other advantages of having a corporation is the idea that it is much easier to raise money to expand your business by having a corporation. Having an incorporated business is looked at more seriously when they are dealing with potential partnerships, banks, and other companies. Being incorporated insures your business financially, you are taken seriously by other companies, and you are more likely to raise money since being incorporated means that you are less likely to go out of business, and able to pay your debtors.

 

These benefits are not to be taken lightly when considering which legal structure to put your business under. If you are trying to build a business that will be in business for a long time, you should consider incorporating it.