If you’re considering incorporating your business, but aren’t sure whether or not it’s the right path to take, this article should provide you with the key points to consider.

When you incorporate your business, you are legally separating it from yourself and officially giving it a separate legal identity.

Prior to incorporation, you, as the business owner, personally own the assets of the business. But, much more important, you are also personally responsible for your debts and liabilities. This means that if your business fails, your own personal assets are at risk!

Therefore, it can be a significant benefit to you, if you decide to incorporate your business, as it will protect your property and personal assets.

After you incorporate, you will only be personally responsible for amounts owed by the business up to the amount you have invested in the business.

Beyond your invested principal, you will have no further personal liability for the payment of debts owed to your business creditors, unless, of course, you have signed separate personal guarantees for specific loans or debts.

Personal guarantees may be necessary when your business has little trading history or when your balance sheet is not strong enough to provide sufficient collateral to lenders.

There is also another benefit of incorporation. Another point to consider is that after incorporation, your business is protected from your own personal debts and cannot be harmed by your own credit problems.

You should also keep in mind that if for any reason your incorporated business ceases to operate, all of your creditors and liabilities must be paid before you receive a return on your invested capital. Basically, in times of trouble, shareholders are always the last in line for redemption.

Your decision to incorporate your business is very important, especially if you hope to expand your business in the future. Incorporated companies will often find it easier to raise the new capital needed for expansion from financial institutions.

Incorporating your business sends a message to the financial world that your business will be around for the long haul, and that sense of security makes it easier to find additional funding.

Incorporating also allows you to easily transfer ownership of your business. Separating business assets and liabilities from your personal assets makes valuing your business easier. Incorporating your company simplifies the use of retirement plans and insurance plans.

Once incorporated, your company is governed by its Board of Directors. Directors are elected by shareholders, who then act as agents of the company on behalf of the shareholders.

Finally, business tax rates are much lower than personal tax rates. However, there are some double taxation issues to consider. While there may be tax benefits, there will be some additional legal and administrative costs associated with being an incorporated business to consider.