Incorporating Your Home Business

One major decision that all home based business owners face is whether or not to incorporate their business. Indeed, there are many advantages and disadvantages to such an action, and it is not something that should be done blindly. There should be much consideration prior to incorporating your home business. However, many home business owners are simply afraid to incorporate their business even though there would be many benefits to them for doing so. There are many myths about incorporation that scare them off. Here are the facts about what incorporating your home business can do for you.

One big thing about running a home business is that the money earned basically just goes to you. With incorporating a business, you would have to set up payrolls each month, and this makes home business owners think that this means they wouldn't be able to pay themselves additional money if they needed it. This isn't true, in fact, you could simply write yourself an additional check and call it an "owner distribution" or a "draw," solving that problem right away.

Other home business owners are scared off by the thoughts of additional paperwork and a few extra taxes that must be paid. Extra taxes, you ask? Yes, for small businesses especially, incorporation usually means the taxes will be a tad higher. For businesses making over $120,000, however, the reverse is true and there will actually be noticeable tax breaks. But the few extra dollars spent can be well worth it to incorporation. Also, yes, there are a few extra forms to fill out, but most home business owners would have the little extra time it takes to fill these out.

Another big issue is the myth that home business owners will have to hold meetings and keep a lot of extra records if they decide to incorporate. This is not true, however, and you could register as a "closed" S-Corporation, meaning that you wouldn't have to hold those meetings or keep the records.