Incorporating Your Scaling Small Business for Growth

When your small business goes through business growth you’ll want to prepared for the changes your company will have to make in order to grow it into a bigger business. One of the main things you need to do is incorporate your small business development so you aren’t held liable for it if it goes under or for its debt. Even if your company is still a small business you could benefit from incorporating it.

Growing into a Large Enterprise is the Dream of Many Small Businesses; Incorporating Can Help Make That Dream a Reality

Forming an LLC or a Limited Liability Corporation is a great plan to make your business last for the long haul. One major reason for you to form a corporation is to remove your liability. That means that if your company tanks you won’t have to take the hit in your personal assets such as your house, car or personal belongings.

Credibility is another big reason that companies incorporate. Rather than just having a simple name like ‘Bob’s Refrigeration’ it would become ‘Bob’s Refrigeration LLC’ or ‘Bob’s Refrigeration Inc.’ Not all customers prefer to do business with a corporation, but there are plenty who do.

If you’re planning on selling your business in the future incorporating your small business development is a great idea. If you don’t have your business incorporated when you leave your business or die, the business will just end. Scaling small businesses often end up being sold to larger corporations and making sure the company is transferred to the buyer is important.

Tax flexibility is another great part of incorporating. A corporation or LLC can avoid double taxes from corporate dividends and profits as well elect to be taxed as a corporation.

Choosing between whether to form a corporation or an LLC can be a difficult choice but luckily there are some clear cut differences that make it easier to decide. An LLC can choose whether or not to file as a corporation or an individual, which is a great flexibility that corporations don’t offer. To form a corporation you need to be a legal US resident but with an LLC you don’t need to be. An LLC doesn’t have to schedule an annual meeting or minute book. A disadvantage to an LLC is that they cannot issue stock, they aren’t able to engage in corporate splitting.

Some advantages to a corporation is that you can issue stock, and you can split the corporate tax liability. You’ll run into some double taxation of corporation profits and shareholder dividends. You have to hold annual meetings and record minutes. There’s a limit on number of owners you can have in an S Corporation.

Forming an S Corporation is a better idea over a C Corporation. With an S Corporation you won’t be doubly taxed on your profits and your shareholder dividends which can attract a lot more shareholders. Both S Corporations and C Corporations need to file their taxes yearly and pay taxes quarterly.

Another option if you are a non-profit organization is to apply for non-profit corporation status. There are a whole slew of advantages to this. The biggest advantage is that you can become tax-exempt and not have to pay any taxes on your profits. Another one is if someone donates money to your certified non-profit corporation they can write it off as tax deductible, a great way to encourage people to donate to your organization.

Some taxes on property will be exempt with your non profit corporation. Non-profits are exempt from paying property taxes under state law in all 50 states to help them accomplish their goals.  Applying for a non-profit corporation status helps appeal to donors who are unsure if they should donate.    A small plus is that you will pay less in postage, which can potentially save you a fair bit of money because USPS offers a discounted rate of postage for non profits. It doesn’t apply to all non profits, and checking with your local postal office is the best way to find out if you’re eligible.

Sometimes choosing which type of corporation you should apply for can be a little bit hazy. Working with a good California Small Business Attorney Services firm to help you understand every advantage and disadvantage to each corporation is a great way to decide. They can run the numbers for you and see what would benefit your small business the most.

Preparing for the Future: Scaling and Small Business Development

Scaling a Small Business is a lot of Hard Work but is Necessary for Business Growth

Having a scaling small business plan in place for your small business is important if you want to make the transition from small business to corporation or big business. Not many small businesses have scaling in mind, but when dealing with business growth, building your business around scaling is important.

It’s much easier said than done but small business scaling and business development generally is not impossible if you’re smart about it.

The first thing you should do is document everything. Whether you’re training an employee, or documenting a business procedure it should be done as soon as possible. This way you’ll have access to all the transactions and training you’ve ever done. When you become a large enterprise you can simply give access to the transactions to your accountants and the training to your new employees. Training can be done either through written documentation or by filming it. In the case of the procedures, you can review them and see what needs to be changed to streamline the procedures.

An Accountant Can Give You the Best Insight for Scaling Small Businesses

Hiring an accountant early on in your business is another great idea to help you scale your business. You don’t need to hire an accountant full time, but have one run your numbers and figure out how exactly to scale your business. Scaling small businesses is a lot easier with someone who can help you understand the numbers and give you the ability to make the best choices as you’re moving on. Basically, if you’re going to restructure or expand your company, discuss it with an accountant.

Finding out if your company is doing well will help you make the transition to a larger enterprise as you can modify your procedures and strategies, but figuring it out is a lot more than just sales numbers. There’s a lot of trial and error to determine what to measure. It might be the number of people who called or walked into your store, or an assortment of other factors.

 Incorporating Your Scaling Small Business to Protect Yourself

When you become a big business, you are going to have a lot more liability. When you’re making the transition you’ll probably want to incorporate your Los Angeles California small business. Protecting your business and yourself is important, and you can do it with many legal entities such as an LLC, corporation, or S Corp. It does cost a bit of money to incorporate but it’s very important to your scaling small business. Some partnerships will still make sense, but you don’t want to stay a sole proprietor or a partnership for too long.

What incorporating does is remove your personal liability from the company. That means you won’t lose money from your personal bank account or lose your home if your company fails. There are also some significant tax benefits and advantages when you become a corporation.

Information runs throughout your whole business and keeping as little information in your head as possible is the best strategy. You’re only human so you’ll likely forget things from time to time which means having it in a database where it’s not going to get lost is an important strategy. Have your employees keep their information written down or stored so they don’t lose it as well.

Remembering everything can make dealing with clients and firms a lot better and even bring in more sales. Even if you have an amazing memory, as you experience business growth you’ll have a harder and harder time keeping track of everything.

Find out what all of your responsibilities are, and create job positions along with detailed descriptions that take care of those responsibilities. That way, when you can no longer handle everything by yourself, you can hire someone easily and not have to worry about that responsibility anymore. It’s a lot better to plan ahead for jobs rather than hire someone and try to figure out which responsibilities they should take on.

In order to plan for all of these bumps in the road, plan some growth management meetings to figure out exactly how you’re going to handle your business growth. That way you’ll be completely prepared for scaling small businesses.