Advantages and Disadvantages of Incorporating New Business

            The things are never easy when someone gets into a business, which is new for them, but it is very competitive in so many ways. IT business is one of the most competitive ones, because with the more inclusion of technology, it is more evident that IT business is gaining more ground. More companies are investing into it because IT is going to be the future for many decades ahead. In such scenario, when things are looking tough, it is important for a company or owner to think deep that what they should do. When situation is getting difficult, it certainly has some potential as well. The growing business of IT is competitive and hard for small businesses to compete, but certainly it also offers various opportunities as well. Being a new IT business, we are trying to make our ground in the industry so regardless of substantial venture capital; I believe we need to think on various aspects, before going for incorporation of our business at such early stage. It is important to analyze some advantages and disadvantages relate to incorporating a business so that we can see where we stand as a company to go for the incorporation.

Advantages of Incorporating New Business

Personal liability: when the owner incorporates its business, it means that a separate corporation is formed, which automatically means that personal assets of the owner are safe and have no risk. Limited liability protects the personal assets of owner in case the corporation is in debt or it is facing other kind of liabilities.

Benefits of tax: An owner of the business can get several tax benefits by incorporating their business. Like they only may have to pay tax on their salary, which they receive. There are many other business expenses, which are tax deductible so owner as well as the corporation can save a lot from these benefits.

Transfer of ownership: Due to incorporation of a business, it is easy to transfer the ownership from one owner to the other because it is viable to sell the stock to someone else.

Continuous existence: if the owner of the business leaves it or passes away, it will not affect the corporation and it will continue to exist. Until the shareholders don’t take any steps to dissolve the corporation, it will carry one.

Credibility to raise capital: when a business is incorporated as a business entity under a legal framework, it has more credibility as a business entity. And this credibility can be good to raise more capital by attracting more investors to the corporation.

Share in the corporation: In such business corporation, it is possible to give stock shares to your employees so that they can take part in the company’s ownership. Such thing is very beneficial for the corporation because employees become more committed, more honest to their company, and work harder as well as it is easy to retain them.

Flexibility and protection: Incorporating the business gives more flexibility and protection. The creditors can’t ask for any liability from the owner as his/her assets will remain separate. So, creditors can just sue for the corporation’s assets.

Disadvantages of Incorporating New Business

Various expenses: To make a new corporation incurs a lot of expense and additional costs. There will be many state laws that will be applicable to a corporation, which needs to be fulfilled. There might be some fees which corporation may have to pay. There can be other fees, which a corporation may have to give on annual basis as well.

Following formalities: There are various formalities, which a corporation may have to follow. Like a corporation has to do record keeping on annual basis, following certain laws, properly holding and maintaining documents etc. These tasks need the expertise of the skilled workers, who know that how to accomplish all these formalities.

Personal ownership lost: If new corporation is like a sock corporation, then personal ownership is lots as one owner can’t retain the ownership, because there are various shareholders, so they will be taken as stakeholders in its ownership through board of governors etc.

Structure requirement: When a new business is incorporated into a corporation, it has to follow a certain proper structure, which asks to have a proper management, accounting practices as well as various operational requirements.

Difficult to dissolve: When a business is incorporated, it has various shareholders. And if due to some reasons, the business is going to be dissolved, but it will be a complex and lengthy process to do so. There are lots of necessary procedures as per Canadian and American laws, which have to be fulfilled before dissolving a corporation.

Recommendation of Incorporating New Business

            After reviewing all the advantages and disadvantages, which are linked with incorporating a business, I would recommend that our IT business should take it as an opportunity, and with such substantial venture capital, we must go for the incorporation of our business as it has various opportunities to grow.