If you own and run your own business, how you classify your business is extremely important. If your business is currently classified as a sole proprietorship or if you are in a partnership, you should schedule some time this fall to sit down with your corporate law attorney and talk about the benefits of incorporating your retail business.
#1 Limits Your Personal Risk
Running a small retail business operation can be risky. You need to have a great location and you need to sell quality products. However, having those two elements is not enough. You also need to be able to connect with and bring enough customers every month to support your business.
When your retail business is classified as a partnership or sole proprietorship, all the risk that you take is on you. If your business fails for any reason, or you are not able to meet a specific bill, your creditors can come after not only your business assets, but also your personal assets as well.
The same is true if someone is hurt in your business or because of your products. As a partnership or sole proprietorship, the injured individual can take you to court and collect damages that you are obligated to fulfill from either your personal or your business accounts.
If you want to protect your personal assets while also running a business, your best option is to have your retail business incorporated. As a corporation, your business is responsible for settling its own debts. If your business does not succeed or if you are sued, only your business is liable, not you as an individual. That means your house, savings and other assets will all be protected.
#2 Protects Your Businesses Name
Another benefit of incorporating your business is that you will be able to protect the name of your business. Generally, if another business tries to become a corporation and has the same name as you, your state will not allow them to incorporate. By becoming a corporation, you protect your businesses name and reputation by making it exclusive.
#3 Increases Your Credibility
Next, when you incorporate your business, you increase the credibility of your business. By adding either LLC or Inc to your name, other businesses that you deal with will know that you are operating as a corporation. Since a corporation, as long as all the paperwork is filed on time, can last even after you pass, a corporate name has a certain degree of staying power that a regular business does not have.
You may find that other businesses and vendors are more willing to work with you once they know that you are incorporated. Adding either LLC or Inc to your business name can also increase your credibility with some of your customers and could potentially help your sales.
#4 Makes Getting Investors Easier
If you incorporate your business, you will have an easier time expanding your business through investments. When you are working as a partnership, someone has to be willing to enter into a partnership with you in order to invest in your business. Or, you will have to pursue a business loan in order to increase your capital.
However, when you are an incorporated, you can issue stocks that can be purchased by investors when you need to raise capital. Individuals can invest in your company without having to become a partner in your business.
If your retail business is growing, you should talk to your business lawyer about incorporating your business. Your lawyer can discuss with you the specific advantages and drawbacks of incorporating. If you decide to go that route, your lawyer can help you draw up the appropriate documents.
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