When Should I Incorporate

Usually, the "right" time for someone to incorporate was long before they thought about the question. There is no standard answer to the question, "when should I incorporate?," this usually depends on what your business has done in the past and what your future plans are.

Many business advisors recommend incorporating when revenue reaches a certain amount or tax savings justify incorporation. These perspectives greatly underrate the value of incorporation.

If you are concerned with financial privacy it is best to incorporte at the very beginning, if possible. Then the history of events does not lead to you, but instead to the corporation.

What value do you place on business risk? The fact an asset or activity exists under the corporate umbrella could save owners millions in liabilty and judgments.

Even from the revenue/tax perspective, there are other good reasons to consider incorporation. One of those reasons is that income is used to determine your tax liability as losses are deductions against your income. Most new companies are expected to initially have financial struggles or loss. New corporations can spend money in many ways that might otherwise be considered personal spending. The corporations startup expenses may include airline travel, retirement plan contributions, maintenance, health insurance, car leases, meals, and numerous miscellaneous items. As you build up your loss you can reduce or eliminate future taxes by using a tax loss carry forward.

There is much more to consider than just setting an arbitary income amount before you consider incorporating.