The Pros and Cons of Registering your Business
You’ve already gone through the hardest part of launching a small business, but what’s next? As a first-time business owner, there are many new choices you’ll have to make. Part of this decision-making process includes choosing whether or not to register your business. While there are plenty of benefits that come with registering your business, there are also a few considerations you’ll need to investigate.
Incorporating your small business, which is the process of forming a company or other organization as a legal corporation, helps protect your personal assets. Limited liability is defined as the legal structure for a business or organization where profit loss will not exceed the amount that’s invested into a registered business. This means that as a registered business owner, you are not held accountable for any debts or additional liabilities.
Depending on the size of your business, all business owners or partners involved are also not held accountable for any personal liabilities should they occur.
Business taxation, or the money paid toward taxes, is another reason that small businesses often decide to register as a corporation. Registered businesses are only taxed on salaries/payroll and additional compensation, like holiday bonuses. Additionally, if your business is registered, insurance premiums and additional employee benefits, such as subsidized meals or activities, can be deducted from your taxes.
Better business credibility
Registering your business can also help spread your brand awareness. Once you’ve finished the registration process, you’ll get the advantage of making more impressions on potential business partners or investors. This means, your profit could increase and you’ll have more to spend on your marketing efforts, which in turn helps increase your business credibility.
Even better—you’ll make it more likely for potential clients and customers to choose your business over competitors in the same industry because you’ve made that first impression.
Lots of paperwork
Registering your business as a corporation requires a lot of attention and ongoing paperwork. Registered businesses are required to document all business and financial activities, including tax returns, board meetings, invoices and accounting records, and more. Every state is different, so double-check that your business is meeting all the local and state requirements for record-keeping business activity.
Twice the taxes
Choosing to register your business also impacts your yearly tax returns. “Double taxation” occurs in this case, meaning you’ll be filing not just one, but two tax returns: one for personal income tax and the other for corporation tax. There are also additional fees that come with registering your business and filing both returns, including legal fees, account fees, and more.
If you decide to register your business, you’ll want to consider potentially restructuring your business. This can range from establishing new business bank accounts and operations, introducing new business ownership or management with shareholders, and more. When you decide to become a corporation, you’re also required to follow regulations based on the state you’re registering in, so check your state regulations before you decide to register your business.
Now that you’ve read the advantages and disadvantages, are you ready to register your business? Check out these SumUp articles to learn more: