As I speak with many new drivers and owner operators I get asked the question quite often as to whether they should incorporate their business or not. There are some very important things to think about when deciding on moving forward with incorporation, however most owner operators don’t look at the total picture. Much focus on the cost and the cost can vary because it is based upon the assets you have for your business and the type of business you are in, but these costs are small when you look at the big picture over time. The costs are also a lot less in the beginning as opposed to later in your business when you have more assets to worry about. Your costs also will go up for bookkeeping and accounting fees, but again that will help in the long run to keep your company viable. Even as a sole proprietor you will have those expenses just on a smaller scale. So let’s look at the benefits of incorporation and why it is a smarter choice for the long term.
In my mind anyone who is planning on making $80,000 or more per year in their business should look at incorporation, maybe not the first year but eventually because it will help tax wise and show that you are in the business for the long term. Many people view sole proprietors as people not very serious about their business. If your business has opportunities for you to be sued or have other liabilities then incorporation is important because it helps to protect your personal assets. Some larger corporations will not work with businesses that are not incorporated so incorporation helps you with contracts and other business options. If you are looking for funding options many banks and financial institutions require that you be incorporated. Tax breaks are one of the most important advantages to being incorporated as corporations are taxed at a lower rate than other types of business models. That advantage alone is enough to offset the cost of incorporating. If you ever wanted to sell your business or parts of your business you need to be incorporated to sell a business. The other major advantage is that as a corporation you become an employee and are able to regulate your salary to be the best tax situation for you personally. This helps you pay a much smaller tax rate helping you save much needed cash flow. So how do you set yourself up to be incorporated?
There are a number of ways to do this. If you are just starting out in your business then you can complete the filing application online. You can also visit your local small business development centre and complete this at their office. If you have many assets to include in your business or if you feel that the process may be too involved then I would suggest working with a lawyer that works with business law. In all cases I would suggest getting advice from people that understand the incorporation process. Incorporating online can range anywhere from $250 to $1000 and lawyers would of course have additional fees. Remember that you are going into business for the long term and part of your success comes from starting your business out on the right footing. Structure builds houses, roads, and businesses. If you don’t have a plan then you will have a hard time knowing if you have reached success in your business.
About the Author
Bruce Outridge is a business and leadership consultant for the transportation industry and entrepreneurs. More information can be found on his services at www.outridge.ca