One of the first things truck brokers need to decide is how to set up their firm. The law recognizes a number of ways to do so, including sole proprietors and partnerships. But you may find that incorporating your business is the right way to go. Here’s a look at some of the pros and cons of forming a corporation:
1. As a sole proprietor or partner, your personal assets are at risk in the event you should ever be sued or fail to pay business-related debts. Your home, bank account, vehicle, and even jewelry can be taken. If you incorporate, however, the only thing that can be taken are the assets of the corporation itself. This alone is enough reason for many business owners to incorporate.
2. Corporations enjoy many tax benefits unavailable to other types of businesses. For example, health insurance premiums can be deducted. And corporate enterprises are taxed at a lower rate than sole proprietorships. By incorporating and paying yourself a salary from your profits,you can significantly slash the amount of income tax you pay. You can even lease a business you own to the corporation, and deduct the cost of the rent from your company’s income.
If you ever want to sell your brokerage, incorporating makes your business more attractive to potential buyers. That’s because the new owners will not be held personal liable for most mistakes you might have made. On the other hand, someone who buys a sole proprietorship can be held liable for what the previous owner did. This can making finding a purchaser very difficult.
3. Keeping you business affairs confidential is much easier if you incorporate. Corporations are entitled to keep much of their information private, in order to maintain a competitive edge. And, if you incorporate in states like Nevada, you are granted additional rights to privacy in your business and financial affairs.
4. When approaching new prospects, being able to introduce your firm as a corporation adds an air of credibility to your presentation that is lacking when you’re a sole proprietorship or small partnership. Having INC. or CORP. after your business name can gain you clients that would otherwise pass you by.
5. Because a corporation can sell stock, you have other ways to raise operating funds besides using your personal credit or going to the bank for a loan. Of course this approach isn’t right for all brokers, but it’s a nice option to have on hand.
6. While we tend to think of corporations as being huge conglomerates, in fact they can be as small as one or two people. So don’t think that you brokerage is too small to benefit from incorporation.
1. Depending on the state you choose to incorporate in, the procedures for doing so can be expensive and time-consuming. In some cases you might need to hire an attorney to handle the paperwork, which adds additional costs. These requirements vary widely from state to state.
2. Even after you’re incorporated, you must keep detailed record on meetings, expense and revenue information, and many other details. Failure to do so can get you in trouble with the state regulators, and can actually end up costing you money if you need to hire a bookkeeper to handle your financial information.
Though partnership helps you to start your own business but there will be disadvantages that needs to reconsider. The scenario would be like, you may end up either gaining profit of the established business or losing the business you put up because of that partnership.