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  • Services
    • Tax Preparation
    • Home Loans
    • Personal Finance Coaching
  • About Us
    • Meet Chad
    • Meet Emilie
    • Chad's Story
  • Client Resources
    • Tax Resources
    • Home Loan Resources
    • Financial Coaching Resources
  • E-News
  • Client Reviews
  • Contact Us
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My business is currently structured as a sole proprietorship, should I incorporate?


Generally there are three reasons people want to incorporate:

1) Tax Savings
This is often overstated. With an S-Corp, income still flows through to individual income tax returns and has the same tax implications as a sole proprietorship; and the same deductions are available for business expenses with either structure. Some tax preparers will tout tax savings that are achieved illegally, essentially taking some pay as dividends or distributions rather than earnings, allowing the taxpayer to “save on self-employment taxes.” The problem is that for an individual running a business, this structure is generally illegal since the income is earned income, not dividends from investment. So the tax savings is not legitimate. In addition, corporations require arduous paperwork, including corporate meetings and minutes, along with additional fees to the CA Franchise Tax Board ($800 per year) and additional tax preparation/legal fees.

2) Liability Protection
This is usually unnecessary via incorporating, depending on the business type. Business owners can often achieve the same protection by way of acquiring business insurance, and for a much lower cost. It would be prudent to speak with an insurance agent to inquire about business insurance options. Remember, even with a corporation, owners of the corporation can still have individual liability despite the corporate "umbrella". For example, if a corporation owner drives under the influence and kills a pedestrian, the corporate "umbrella" will not protect that individual from legal ramifications. Ultimately, there's still a personal liability element even when a corporation is present.

3) Company Structure
This is usually unnecessary with a “one-person shop”, since incorporating isn’t needed in order to manage the different ownership shares of partners, shareholders, etc.  

We recommend speaking with a qualified tax attorney for more information on incorporating. Contact us if you’d like an introduction...we’d be happy to help!
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​​Copyright © 2022 Chad Peshke LLC, All rights reserved. NMLS #2244878. Material contained in this website is for informational purposes only and is not meant to be construed as direct financial advice for your specific situation. It's recommended that you consult with your own advisors for personalized financial guidance. Since we're not licensed attorneys, we cannot provide legal advice. As such, any info contained in this website should not be construed as direct legal advice. While Chad Peshke LCC is registered/approved with CA & ID, the trade name "CP" is not approved to be used in ID. This has no impact on our ability to legally do business in CA & ID as Chad Peshke LLC.