When you’re working from home, it can be easy to view your business as a side venture. Side ventures don’t need your full attention, and they’re less of a risk. But there’s no reason your at-home business can’t be a full fledge, incorporated business. Small business owners have a couple of different choices when deciding which entity to file their business as.
Here, I’ll go over the corporation.
1. Corporations have a strong history.
Corporations have been around for a long time. Some small business owners think that filing a corporation may be too much work with all of the laws, rules, and regulations it takes to keep one afloat. To run a corporation, you need to have board meetings, shareholder meetings, annual meetings, and record every major decision the business goes through. Though, when all of these rules and regulations are upheld, your business gets to stand on a rock-hard foundation. Since corporations have been around for so long, a lot of trial and error went in to creating the most solid, successful type of entity possible.
2. You have options.
Though corporations do not have pass-through taxation like an LLC, corporations can always elect to be taxed as an S-Corporation. The S-Corporation solves the issue by allowing any profits earned to pass through the corporation, untaxed, straight to the company shareholders. Though to meet the requirements to gain an S-Corporation status your business needs to: be filed as a US corporation, maintain only one class of stock, have a maximum of 100 shareholders, be comprised of shareholders who are individuals, estates or certain qualified trusts, and consent in writing to the S-Corporation election. So you can get all the benefits of a corporation while being taxed like an LLC.
3. Protect your assets.
When you file as a corporation, you are legally separating yourself from your business. Meaning your business’s debts are no longer your personal debts. This especially comes in handy when businesses are served. If your business owes a lot of money, your personal assets (like your house and car) aren’t up for grabs to pay that money back.
4. You have the option to sell shares.
Another great benefit to filing as a corporation is the ability to sell and distribute company shares. When you’re first starting out, every penny counts. Selling shares is a great way to get your business’s feet off the ground and gain some support from people who are truly invested in your business (in more ways than one). Just remember to keep up with shareholder meetings to keep everyone in the loop and keep your business compliant with the state.