So You Own a Small Retail Business. Should You Incorporate?
We know what a whirlwind it is once you decide to start your own company. After all, you’re often operating with a limited budget and few (if any) team members during those early days. For a retail business, it’s easy to devote so much of your focus to one-upping your competition that you don’t even consider whether you should incorporate until much later in your company’s lifespan.
But there’s definitely value in incorporating before your company really blows up. If you’re looking to create an expansive retail brand (with multiple storefronts, for example), you might benefit from forming a corporation — but for most retail businesses, a Limited Liability Company (LLC) should suit your needs. So, as you wonder how to start a retail business, here are a few key reasons why you should incorporate as soon as possible.
Why Incorporate — Cover Your Assets
Many companies decide to get incorporated to take advantage of the numerous protections that come along with this legal status. As a business owner, you want to minimize the legal risk involved in your business dealings, and forming an LLC for your retail company can help create a clear delineation between your business and personal accounts.
This simple action maximizes the protection of your personal assets and limits the liability that you leave yourself exposed to. As you can imagine, this can be a tremendous way to relieve some of the stress of starting your own company and give you greater confidence as you make other business-related decisions. So even if you aren’t necessarily required to incorporate early on, it’s rarely a bad idea to do so for legal reasons alone.
You can also think of incorporation as a way to make it that much easier to file taxes when the time comes. When you have your business clearly established as its own entity, you can take advantage of a wide variety of deductible expenses that would never be accessible to you as a sole proprietor. Both you and your business receive the same rights as an individual, with tax law often favoring corporations with lower tax rates and even the chance to defer taxes altogether. If you’re looking to play it safe with your retail business, then incorporating as soon as possible is easily a good decision in case you run into financial or legal trouble later on.
Keep Your Retail Business Growing Strong
If you’ve been in business for a while, you might be wondering why you need to bother with incorporation. After all, you’ve been doing just fine without it so far — why should you take the time and effort to create an LLC now? Well, we’re glad you asked. Just because you’ve lucked out with incorporation up to this point doesn’t mean you haven’t inadvertently been putting your entire venture at risk. In fact, we highly recommend that businesses in any state of expansion take that opportunity to incorporate since not doing so leaves you more vulnerable to legal issues and other complications.
By expansion, we mean any forward momentum that brings other people into the picture. If you’re looking to hire employees, you’re particularly in need of incorporation — it makes it much easier to manage employment laws and regulations. As your company grows and expands, you might even consider becoming an S Corporation or C Corporation if you want to create business partnerships or expand on a grand scale, respectively.
Even if you’re not quite ready to take your retail business to the big leagues, an LLC is an effective way to build toward your future. Whatever you decide, be sure to get informed about all your options and plot out a long-term vision for your company’s success.
Creating a Legacy
Beyond the legal and tax benefits, incorporation lends your company a level of professionalism that can rarely be matched by other means. Because your business is literally (and legally) its own thing, it instantly bears more credibility. You are able to more effectively conduct business and build toward growth when you have an LLC under your belt. In addition, having a legal entity for your company implies a sense of ownership, accountability, and history. Regardless of how long your company has been in existence, an LLC not only demonstrates just how serious you are about your business but also your intention to create a legacy for it.
Think about it: sole proprietorships (businesses with no formal legal structure) come and go all the time. But going the extra mile to incorporate means you’re committed to operating for the long haul. You’re a true entrepreneur in every sense of the word. An LLC ensures that a company can outlive its current owner, change ownership, be sold to another business and go on for decades continuing the same mission for which it was founded — or evolving with the times. That’s a pretty powerful way to distinguish your company from other businesses out there…and it’s easily achievable for you right now.
So why incorporate? Hopefully, the above discussion has at least given you some food for thought to contemplate whether your retail business needs the protections that an LLC can provide moving forward.
If you decide incorporation is right for you, Incfile will be happy to make the process simple. Our website offers a ton of resources you can use to learn more, and we’re ready to handle all the paperwork and processes involved in your incorporation. We offer several different packages that all come with our professional and knowledgeable service at your fingertips.