Small Business Incorporation

If you're the owner of a small business, you know all too well the risks involved in running a company.  If you fail you can potentially lose everything you own.  What's worse is that not everything is in your control … changes in the general economic environment can have a huge effect the demand for your products or services, as well as on the cost of providing them as well.

A high percentage of new business ventures fail, so it's important that you protect your personal assets as much as possible.

Also, another predominant reason for small business failure is too rapid growth.  Rapid growth can cause cash flow shortages, for example the costs of new equipment and stocks swallow up cash before sales can be made.

All of the above risks and scenarios are reasons why you should consider small business incorporation for your company.

You can read about all the benefits of business incorporation here, and about all the disadvantages of incorporation here.

But basically, as a small business owner, the prime reasons for incorporating your business are to provide yourself with limited liability protection, and secondly to assist with your plans to grow your business.

Once you've established your business, you should seriously consider incorporating it to protect your personal assets.  Incorporation means you effectively give your business a separate legal identity, and in doing so, you're personal savings and assets are no longer at risk.  Following incorporation the amount you can potentially lose is limited to the amount of share capital you have invested in the business.  Beyond that the business's creditors have no call on your own assets, only those of the business.

Incorporation also provides your business with a formal share structure that gives you the ability to value your company easily, and to issue further shares in order to raise additional capital when required for growing the business.  The formal legal structure of the company also provides reassurance and confidence to the financial institutions, should you need to borrow towards your planned growth.

There are downsides to incorporation, but if you are serious about longer term growth for your company, going down the route of small business incorporation should be a serious consideration for you.