Is My Small Business Ready to Incorporate? Five Clues That it Might Be Time

Incorporating a business can be time-consuming, costly, a hassle to keep in compliance, risky—and it just might be the best small business decision you’ve ever made. Here are five clues that it might be time to take your business to the next level.

Ready to incorporate and add "Inc." to your business name?
Ready to incorporate and add this to your business name?

1. You need to take out a huge loan.

While incorporating doesn’t give you free license to take out irresponsible loans with no intention of paying them back (the corporate veil doesn’t protect shady business dealings), it does allow you to breathe a little easier knowing that you’re not personally liable to repay the loan if things go awry.

Many businesses, especially those with little tied up in overhead costs, can comfortably remain unincorporated. But if you’re taking out a very large loan on behalf of your business, if you incorporate, the legal separation between owner and corporation may help set your mind at ease.

2. Your chances of being sued have increased.

For instance, you might be getting along just fine as a reseller of pet supplies, but if you’re considering bringing in a local vet a few times a week to offer walk-in checkups, consider whether you’re comfortable being personally liable for any lawsuits that may come out of the pet care you provide, or whether you’d prefer your business to assume this liability.

Incorporating allows you to operate your business statewide.
Incorporating allows you to operate your business statewide.

3. You want to do business statewide.

In many states, a Sole Proprietorship DBA or Assumed Name (an unincorporated business) is registered at the county level—or even at the city level—which means that registering a business only gives you the right to operate your business in that county or city.

But it’s not as simple as that: most, if not all, counties and cities require you to hold a physical location within their borders in order to register there. This means, to run a business statewide in some states, you’d need to open a storefront or have an office in every single county . . . or incorporate!

4. You want exclusive rights to your business name.

Rules on DBA/Assumed Name name availability from state to state vary wildly; while registering a sole proprietorship DBA in one state might provide exclusive rights to that name in that state, another state might allow an infinite number of DBAs to be registered in that state under the same name.

However, once you incorporate, all states grant you some level of exclusive business name protection. While the strictness of the naming rules does vary a bit from state to state, some states being more lenient than others on what is considered “confusingly similar” to another business on file, you can rest easy knowing that once you register Martha’s Baked Goods, Inc., you will be the only one!

5. You want your business to live on after you’re gone.

Incorporating allows your business to live on long after you're gone.
Incorporating allows your business to live on long after you’re gone.
If you operate a sole proprietorship, the business is tied to you directly; if the owner of a sole proprietorship dies, the sole proprietorship dies with it.

A corporation, however, is its own entity. It exists outside of its owners, so it can exist for perpetuity, ownership can be transferred—and your corporate bylaws will lay out provisions for what’s going to happen to the corporation should the unthinkable happen or should any other issues arise.

What are you waiting for? ClickAndInc can help you incorporate your business today!

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