I sell products out of my home and at parties hosted by my friends and relatives. How can incorporating or forming a business entity help me?
Your income is important to your family. Why not keep more of what you earn? Forming a business entity can protect your personal wealth and help you realize a tax savings too.
- Limited Liability. If you operate as a sole proprietor, your personal assets are at risk from business debts or possible lawsuits. However, owners of corporations maintain separate business and personal identities; therefore, their personal assets are shielded from the debts and liabilities incurred by the business.
- Credibility. Often when a potential customer is looking for a certain product type, they will lean towards the company that has Inc. or LLC after its name. Incorporation adds immediate credibility and authenticity to your business.
- Tax savings. Tax rates for business entities are lower than the individual tax rate. In addition, expenses like insurance and travel for business purposes may be eligible tax deductions.