Reasons to Form a Business Entity

This Cash Flow Tip is for sole proprietors considering reasons to form a business entity.

The information comes from VCorp Services and shows how forming the correct business entity can impact the cash flow and tax structure of an individual starting a business -- from brick and mortar stores to individual consultants.

VCorp is a leader in turnkey state corporate filing services and a member of BDO Seidman Alliance, a nationwide association of independently owned local and regional accounting, consulting, and service firms with similar client service goals.

Reduces Personal Liability

Incorporating helps separate your personal identity from that of your business. Sole proprietors and partners are subject to unlimited personal liability for business debt or law suits against their company. Creditors of the sole proprietorship or partnership can bring suit against the owners of the business and can move to seize the owners' homes, cars, savings or other personal assets. Once incorporated, the shareholders of a corporation have only the money they put into the company to lose, and usually no more.

Adds Credibility

A corporate structure communicates permanence, credibility and stature. Even if you are the only stockholder or employee, your incorporated business may be perceived as a much larger and more credible company. Seeing "Inc." or "Corp." at the end of your business name can send a powerful message to your customers, suppliers, and other business associates about your commitment to the ongoing success of your venture.

Tax Advantages - Deductible Employee Benefits

Incorporating usually provides tax-deductible benefits for you and your employees. Even if you are the only shareholder and employee of your business, benefits such as health insurance, life insurance, travel and entertainment expenses may now be deductible. Best of all, corporations usually provide an increased tax shelter for qualified pensions plans or retirement plans (e.g. 401K's).

Easier Access to Capital Funding

Capital can be more easily raised with a corporation through the sale of stock. With sole proprietorships and partnerships, investors are much harder to attract because of the personal liability. Investors are more likely to purchase shares in a corporation where there usually is a separation between personal and business assets. Also, some banks prefer to lend money to corporations.

Contact www.vcorpservices.com or call 1-888-52-VCORP.