5 Reasons to Incorporate if You’re a Consultant

If you’re working as a consultant in any industry and you haven’t yet incorporated yourself you should really get started today.

A corporation is completely separate from yourself – so, the corporation can make more money than you – and you only need to pay yourself a salary that covers your expenses and leaves the rest int he corporate account.

Incorporating your business has some real advantages for consultants…

5 Reasons Incorporating as a Consultant Is a Must:

1. Saving $ at the End of the Year
You can probably save vast amounts of money on taxes at the end of the year if you incorporate your business. Your accountant can maximize deductions for you – depending what corporate structure your business takes on (LLC, S-Corp, etc.).

If you work for someone else you’re taxed on everything you receive as income. Your taxes might be 30% a year. That’s a lot. Especially considering you have extra money left over that you didn’t really need for expenses each month – and that went into your bank account. Well, you’ve already lost 30% on that income, so, if you deposit it and make 2% interest in one year, what have you really made? Negative 28% interest.

Instead, lets look at another scenario. You incorporate your business. Companies and individuals that are paying you for work done pay your company, not you. You pay yourself from your business checking account just what you need for expenses. The rest of the money stays in your business checking. You can write checks on that for business expenses and pay no taxes on that in the case of LLC and S-Corp companies.

Which is the smarter move?

Be careful, C-Corporations, or regular corporations without LLC or S-corp status pay taxes at the 35% rate on all income. Choose corporate type carefully.

2. Personal Responsibility is Lessened
For strict peace of mind – an essential in today’s stressful times, a great reason to incorporate your consulting business is to remove personal liability from the equation. Making a corporation puts a buffer between your business and personal assets. Your home, personal bank accounts, and other items you own personally like house and car, boat, or whatever are relatively well protected from litigation should someone decide to sue your business.

Incorporation is not a guarantee a court won’t find you personally liable for misdeeds though. You could in fact lose everything if a court decides you acted maliciously or negligently in your business dealings.

3. Less Chance the IRS will Audit you
Unincorporated businesses are audited more by the IRS probably because the IRS knows that it’s more likely to find problems with unincorporated businesses. Schedule C filers are at higher risk for audits.

4. Business Credibility Increases
When people ask the name of your business or corporation and you say – there is none that sends a message. The message is that you either don’t know enough about what incorporation can do for you – or, you’re not a valid company. Incorporating adds instant credibility to your business. It shows others that you’re serious about this – it’s more credible as an incorporated business.

There is also the higher probability that you’ll get funded if you’re looking for money from banks, credit unions, or other corporations. Corporations take other corporations seriously. It’s hard to take individuals seriously if they’re not incorporated.

5. You’ll Likely Find that Your Health Insurance Costs Less
One major expense in American’s lives is health insurance. After you incorporate your business you’ll find it easier to get cheaper health insurance

Summary
Incorporating your consulting business is probably the smartest move you can make.You’ll save money, gain credence in the business community, and locate funding more easily. Your assets will be further from the court’s reach and you’re less likely to get audited than you were.

You shouldn’t need any more reasons than these!