Being careful about setting up of your business is key to being successful. Often business owners to be dedicate a lot of time setting up their shops, decorating them, advertising, hiring people, choosing an appropriate name, etc. Among the less considered factors, however, is the type of business structure. Most people forego incorporating the businesses in favour of easier registration processes. Whether or not incorporating is necessary depends on you and your business, but consider about the advantages first:
• Protects Your Assets – Sole proprietorships and general partnerships are very common business structures that everybody seems to go for due to relative ease in setting them up, lack of complex Hong Kong company registration and bank account set up, along with a freedom to make decisions. However, they do not protect the owner in case the business goes wrong. In case of lawsuit or a need to settle business debts, owners will be forced to sell their belongings to meet those requirements. This is not the case with incorporated companies, which one of the main selling points of incorporation
• More Credibility – Incorporated companies tend to have more customers and people interested in making business deals with them. Incorporated companies can have protection of their names as well as more legal credibility, which only helps in attracting investors as well as raising funds. Due to this, incorporated companies have more potential for growth compared to other type of businesses and this alone is worth the higher business registration fees.
• Tax Benefits – As the owner of an incorporated company, you have many ways of enjoying tax benefits which are pretty much impossible to accomplish with other types of business structures. With the business being a separate legal identity, you can easily rent out buildings of facilities owned by yourself to your company, while still claiming rental expenses for your business and building depreciation for yourself. Depending on where you live, your mileage may vary but you are bound to encounter many ways to lessen your taxes.
• Unlimited Life for Business – In sole proprietorships and partnerships, the business will cease to exist once the owner or a partner who signed the agreement dies (or if he decides to cancel the agreement). This effectively gives such businesses a short lifespan. An incorporated company (like any large multinational company out there) has no such limitation, and it can continue to function indefinitely until it goes bankrupt or reaches the end goal.
• Easier to Sell your Business – If for some reason or the other, you may want to sell your business to somebody else, incorporation can help you greatly in finding an interested buyer. The reason for this is again the attractiveness of the limited liability, which means that the new owner will not be entangled in legal problems of the previous owners.