As financial planners who specialize in working with business owners and incorporated professionals, we get a lot of the same questions that come up. Among these common questions are “When should I incorporate?” or “I’ve incorporated…was it the right choice?” We know you might be having those same questions about whether you should incorporate your business or if incorporating was the right decision.
So, let’s get to the answers in today’s post.
When Should You Incorporate Your Business?
A corporation can be a fantastic financial planning tool. It gives flexibility on how to pay yourself, saves taxes, and helps to accumulate significant wealth.
So, when is the right time to make the move and incorporate your business?
Accountants will often give you two fallback answers.
- “Only when you have money left over in the corporation,” or
- “Only when you’re making over $200k per year”
The problem is, this advice is very generic.
And, if you don’t do the due diligence you might be missing out on numerous benefits and leaving money on the table. Each situation is different and requires a deep dive into how incorporating will specifically benefit you.
In most cases, for business owners who plan to grow, increase, and build their business, then incorporating opens up a lot of options for innovative financial planning.
Of course, there’s no one right answer that applies to every business owner. Before you make a decision, your unique and specific circumstances need to be taken into account.
The best way to find out is to take the time to sit down and identify your goals. Then, you can see if a corporate structure will help you get there, regardless of your current income or savings.
(On the subject of goal-setting, be sure to read this post next to learn about how financial goal-setting helps and why it matters)
Meeting with a Financial Advisor
When you meet with a financial advisor to discuss incorporating your business or any of your other financial concerns, you’re putting yourself in the driver’s seat of your financial future.
Working with your advisor, you can take your unique goals into account and showcase how owning a corporation could help you reach them. Not to mention, your advisor can offer up helpful strategies you can use within the corporation to grow your wealth.
When you meet with a financial advisor at Ocean 6, we’ll highlight the benefits of incorporating a business that might apply to you.
(There are all kinds of ways to use your corporation to invest and save taxes, including paying life insurance with corporate dollars. Read about the other ways here)
Incorporate Your Business If…
But if you simply can’t wait until then, let’s talk about some telltale signs incorporating your business might be the right move for you.
If you plan to grow your business, as most people do, then incorporating often pays off for the following reasons:
- Flexibility on how much personal income you can take
- Thousands (if not tens of thousands) of dollars you can save on tax each year
- Use of the capital dividend account to access tax-free capital
(Are you new to the concept of having a capital dividend account in your corporation? Visit this post next to learn why this is one of the best-kept secrets and underutilized tools business owners have at their disposal!)
Contact Ocean 6 Today
There’s so much opportunity for proactive planning within a corporation that can add significant wealth over your lifetime.
Connect with the team at Ocean 6 today so we can demonstrate how owning a corporation can benefit your financial future.
Did you learn a lot from this post? Here are three more to read next: