The BizFilings blog covering business tips and trends.
When is the Best Time to Incorporate Your Small Business?
Published on Nov 17, 2010
Read our article, 'When is the Best Time to Incorporate Your Small Business?' at 'Time to Start Up,' the small business blog by BizFilings.
There are many reasons why you may consider incorporating your business. The primary ones include:
Protecting your assets
Gaining tax advantages
But when is the best time to form an LLC or form a corporation?
This is the million dollar question. If you are a small business owner already up and running, a principal advantage to incorporating immediately rather than waiting until the beginning of the New Year, is to minimize the risk to your personal assets. The longer you remain unincorporated, the longer you are exposing yourself to unwanted losses.
Additionally, it is just as significant to consider that a mid-year incorporation typically results in excessive time and expense to file two tax returns. However, that will most likely be diminished by the self-employment taxes you save by incorporating before the end of the year.
Incorporation experts, like us here at BizFilings, often encourage entrepreneurs who are considering incorporation at the end of the year to delve deeper into exploring the advantages of a delayed effective date.
Some states accommodate business owners to choose a date one to two months in the future for when your business will officially be formed as a corporation or an LLC. This action enables you to manage your paperwork in 2010 and to ask for an effective date in January 2011.
Here are a few ways a delayed effective incorporation date can benefit small business owners:
Saving money. By delaying the date of incorporation, business owners can avoid being taxed and avoid filing an annual report in the current calendar year.
Saving time. By filing before the end of the year, you can avoid getting your filing stuck in the backlog that may occur at the beginning of the year. So if you were to order with us now, many states will allow us to indicate an effective date of January 1, 2011 on the Articles. If you wait until the beginning of January to order, you may not get filed until mid-January or later.