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The Sydney Morning Herald Blogs: Enterprise
There are two main reasons why people choose to incorporate. One is for asset protection and the other is for taxation reasons.
We have found that when people receive quality advice from their accountant or solicitor before they incorporate and they have their reasons for incorporating well defined, then generally their businesses last much longer and are stronger.
Asset protection is the most obvious reason to incorporate. The limited liability offered by incorporating is a great incentive, but this does not mean you can run your company in an irresponsible manner.
Tax savings can also be gained by incorporating. Your business will pay a corporate tax rate and it can declare dividends when profits are made. These dividends are paid to the company�s shareholders. Different classes of shares can have different dividends so you distribute dividends in a way that is most tax effective.
As always the first step is to seek financial advice that best suits your individual circumstances. Factors to take into account are the amount of income you expect your business to make (and we always hope for the very best here), how many assets you own, and where you want your business in the next five, ten and fifteen years. Your main goal might be to turn your business into an asset for sale in the future. Setting a business plan for yourself is always a valuable exercise to begin. Make yourself a five year plan, a ten year plan, even a fifteen year plan and remember to include your personal goals. Your new company can then make all your ambitions turn into reality.
Robert Zitek, Partner, Incorporating Ambitions
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