If you’re thinking about registering your company, or you already have, then you’re probably wondering if it’s the right thing to do. Yes, registering can be expensive, especially if you choose to hire an attorney and file with the Securities and Exchange Commission (SEC). But in the long run, there are plenty of reasons why it’s worth the investment. Here are five of them.
1) Attract Investors
If you’re raising capital, it’s much easier to get money from outside investors if you have a company with at least two years of profit and solid financials. Investors are looking for stability and longevity when they invest, so forming a corporation helps ensure your business will be around in five or ten years. It’s also smart to form a corporation before you bring on an investor; some venture capitalists won’t even consider investing unless there is already another investor on board for new online casinos Australia business.
2) Reduce Taxes
If you set up your company as an S corp or LLC, you can avoid paying self-employment tax on your income. For example, if you’re a one-person business and make $100,000 per year you won’t pay any self-employment taxes on that income (this is 35% * 100k). Self-employment taxes are 15.3% of your gross earnings so if you don’t plan to be a one person business forever it makes sense to register your business. Receive Retirement Benefits: As mentioned above, if you have employees they will be able to contribute to a retirement plan such as a 401(k) through your company. This can help them save money for retirement and also give them an incentive to work hard at their jobs. You’ll also be able to contribute yourself via a SIMPLE IRA or SEP IRA; these accounts allow you to save money pre-tax which lowers your taxable income for the year. Your tax reduction will bring you more benefit in your best online casino business.
3) Receive Higher Investment Valuations
Investors want to see that you’re taking steps to build a company that will last. By registering your company, you can show them (and prove to yourself) that you’re in it for the long haul and willing to put in extra work and planning now, which will pay off down the road. In addition, companies with limited liability can raise more investment capital than those without. Consider: A VC has only 10-15 minutes to evaluate each startup business plan they receive.
4) Reduce Business Risk
As your business grows, so does your exposure to risk. If you don’t have liability insurance or proper financing in place, then any number of things can go wrong—from lawsuits and legal fees to higher interest rates—that will threaten your company’s existence. While you can protect against a lot by registering a corporation, it’s also smart to do things like buy insurance and make sure that all shareholders are protected in case one leaves or dies.
5) Protect Against Lawsuits
The most important benefit of registering your company is that it protects you against lawsuits. In America, no one can sue you without first serving a summons. This makes it difficult to collect judgments against people who don’t have assets and are technically judgment-proof. Registered companies (also called corporations) act as a shield, protecting individuals from personal liability should their business be involved in a lawsuit.