A question that comes up a lot for people who are looking at starting their own work from home business is, “Should I incorporate?” Many work from home businesses or sponsors don’t know a lot about this subject, so it’s difficult to get much guidance. This article isn’t meant to replace advice from your tax adviser or accountant, but what it will do is give you 3 reasons why you should seriously consider officially incorporating your work from home business, and do it as soon as possible.
If you’re someone who is looking at your first work from home business, and you’re saying to yourself, “I’m just checking this out to see if it works”, then you should stop reading now. That type of attitude is one that dooms you to failure before you even begin. Starting your own work from home business is a serious affair, and requires your complete commitment. If you’re just looking, then you should probably just get a job. Now, anyone who is serious building their work from home business should cement that thinking by officially incorporating. Just taking the action of setting up “My Business Inc.” or “My Business LLC” says something about you. It says you’re serious about your work from home business, and then your actions will follow suit with that mindset. Incorporating will also immediately set you above 99% of your competition who are just “checking this out”.
Tax breaks are a huge reason to look at incorporating your work from home business. Here’s the main difference between how businesses are taxed and individuals are taxed: When you work your job, before you get your paycheck, the government gets all of their taxes first, and you get what’s left. When you own a business, the business gets to spend all the income first (on legitimate business expenses), and then gets taxed on what’s left. It’s even possible to owe no taxes at all as a business if your expenses outweighed your income, which is typically the case when you’re just starting out. Now of course, your goal is to operate at a profit, but until that happens, your business should take advantage of all available legal tax breaks in order to assist you in getting your business off the ground. Your tax adviser can tell you more about this.
Personal Credit vs. Business Credit
When you start your work from home business, you’re going to need some operating capital for your startup. You’ll need to buy your initial product, and you’ll need to cover expenses such as marketing expenses, possibly office equipment expenses (e.g., a computer) and maybe travel expenses (e.g., for your first convention). The way most people handle this with their work from home business is they use their credit cards, or maybe a loan against the equity of their house, etc. This can drastically affect your personal credit.
When you incorporate as a business, you have an opportunity to establish credit in the name of the business. This can be a huge advantage for you for many reasons. The first is the amount of capital you can get access to. It’s not uncommon for a new business to have access to lines of credit as high as six figures in their first year of incorporation. Think about the edge you’d have on your competition with that kind of marketing capital.
Another reason for establishing business credit is that if something goes wrong, it doesn’t impact your personal credit. This is most important if the work from home business you’ve chosen runs into trouble and in a worst case scenario shuts down. If you need to, you can always close down your business as well and manage the business debt in an orderly fashion without impacting your personal credit. You can then give it another go and startup a new business. This is the way professionals operate their business. Of course, no one wants to shutdown unnecessarily, but the system is designed the way it is for a reason, and you should take full advantage of it.
There are many things involved in establishing and operating you work from home business. Even more so if this is your first time. You want to put yourself in the best position for success right off the bat, and one of the best ways to do that is to establish your work from home business as a corporation. This will immediately put you ahead of your competition, and give you the best possible chance for success. Get yourself a good tax adviser or business consultant and put yourself on the path to success.
Copyright 2009 Inspire International Inc.
Chris and Julie Chojnowski have been freeing people from “The Matrix” for over 15 years and assisting them to Master their Destiny and Inspire their World by teaching them about the concept of G.P.T. Get Your Free Report Now!