Ask, Advise & Network

A Forum for Independent Consultants


Sorry, you must be logged in to participate in Patina Connects

To sign into Patina Connects, simply use your Patina Nation log in and password you used when you became a member of Patina Nation.

Disadvantages of in...
 
Notifications
Clear all

Disadvantages of incorporating?


Patina Affiliate
Posts: 129
Topic starter
Member
Joined: 3 years ago

A new consultant and member of Patina Nation asks for your insights -- "disadvantages to watch for if I'm considering incorporating?" Comments and experiences encouraged.

9 Replies
Adam Gorski
Posts: 1
Patina Nation Member
Joined: 1 year ago

There are more advantages than disadvantages of incorporating your business. Since the question is what are the disadvantages, the one I see is in higher taxes but you could lower your income through allowable deductions and expenses. 

Regards, 

Adam Gorski

Reply
Timothy Anderson
Posts: 8
Patina Nation Member
Joined: 3 years ago

My firm is a Nevada based S-Corporation.  My firm is located in CT.  I created this corp over 20 years ago, and it has been a blessing, a tax savings, I provide my own corporate health insurance, and corporate retirement + 401(k) match.  If you want to learn more get in touch with Nevada Corporate Headquarters.

Reply
Jean Radeztsky
Posts: 5
Patina Nation Member
Joined: 2 years ago

It depends on what your business is.  When I started my business, I talked to my CPA to understand the types of incorporating, the advantages/disadvantages of each - it was very helpful

One of the many things I like about incorporating, is keeping everything separate - personal & business.  Yes, I pay higher taxes, but I also have the advantage of writing off so many more things.

Reply
1 Reply
John Gonsalves
Joined: 1 year ago

Patina Nation Member
Posts: 2

@jeanavailcoachingandconsulting-com

Agree. I like the idea of separating business and personal expenses. Assuming the income is significant, the deductions far offset the higher taxes but then one can always start with an S Corp.

Reply
Michael McGurrin
Posts: 2
Patina Nation Member
Joined: 2 years ago

Something to consider: There are more forms for a business than being a sole-proprietor and a corporation. If a corporation, the whole tax structure is more complex, and may or may not be advantageous depending on individual circumstances. An LLC (limited liability company, not corporation) is another option to consider, as is a partnership.  

Do note that if you are doing business by yourself, an LLC (and I think a corporation) may not give you as much liability shielding as you might think, since someone can sue you directly as well as the company for the work you performed. 

Reply
Robert Gorman
Posts: 1
Patina Nation Member
Joined: 1 year ago

Legal and tax implications are what should drive your decision as to what business structure to follow.  Generally speaking, corporations (C-corps) are more complex and costly. The size of the entity also has to be considered.  So, net net; it depends.

Reply
John Gilbert
Posts: 3
Patina Nation Member
Joined: 1 year ago

Setting up as a corporation will be particularly helpful in shielding you from taxes as long as you have a growing accrual-based accounts receivable.  However, in years when AR shrinks, you may find that you have a tax liability at the higher corporate rate.  An LLC or partnership allows you to pass the net income through your personal taxes at the lower personal rate.  However, an LLC or partnership will be more complex to manage in terms of adding new partners/members.  The corporation will simplify the process of broadening ownership, if that is an objective.  A thorough consultation with an experienced business lawyer will be helpful to you, I think, in terms of matching the selected business form with your objectives.

Reply
Stephen Taylor
Posts: 16
Patina Nation Member
Joined: 2 years ago

There is no standard answer,  it depends on what you want and intend to do and sometimes may include where and the nature of your product or service.  It will inherently depend upon your financial position, personal and operational.

There are additional options to a corporation, these vary by State, and one can obtain similar tax treatment in different ways.  I would strongly recommend talking his through with an attorney or CPA (quite probably both in the end)  in detail to determine what is best for you and if so, where to do it.

Reply
Bob Galowich
Posts: 3
Patina Nation Member
Joined: 3 years ago

Plain and simple you should speak to a lawyer and not rely on the opinion/observations of laymen - there are advantages and disadvantages to each form of entity you can choose (LLC, S Corp, C Corp, Limited Partnership) as well as to remaining a sole proprietor. Don't try to cut corners and save a few bucks - if you are asking the question you should consult an attorney. If they are at all sophisticated they will also be well versed in the tax consequences and you will not need to also consult a CPA. However, I would not trust a CPA's opinion regarding the legal issues.

Reply

Share:

Search Patina Connects

Recent Activity