Professional corporations, limited liability corporations, partnerships, and sole proprietorships are just a few of the different business entities from which you can choose when you start your own business. There choices are so complex that it’s all too easy to become confused and feel a bit overwhelmed.
Ask yourself what is most important to you about your business. Chances are your answer will be the successful formation of a company and its survival on the market. You want to make money and succeed. You also want to protect your family. For that reason, choosing to become a professional corporation is probably the best answer. Here are three big reasons.
1. Retirement benefits
One of the biggest benefits of becoming a professional corporation is the fact that you can offer your workers a larger 401(K) limit. Though other business entities can offer their employees a 401(K) plan, those options have lower contribution limitations. Lower limitations mean fewer benefits to your employees and to your tax status.
2. Limited liability
Becoming a professional corporation means that you are able to provide your shareholders and business partners with personal asset protection. If, for example, one of your employees is negligent, the personal assets of your shareholders are not placed in jeopardy of being taken by creditors.
Setting up your business as a partnership, in contrast, means that every one of your shareholders would be personally liable for the negligence of one worker. This puts everyone’s personal assets at risk, as well as their stake in your business.
3. Tax benefits
As a professional corporation, your company is allowed tax deductions not available to certain other business entities. For example, your business can itemize tax deductions on such items as dependent care and the disability insurance provided to employees. When these items are used as tax deductions for your business, your tax liability is reduced.
More information about professional corporations
There is much more to learn about professional corporations. As a business owner, you’ll want to educate yourself regarding the full process and ramifications of becoming a professional corporation. Cal Filings can help you acquire and understand the details associated with filing for and becoming professionally incorporated.
The benefits your business enjoys when it operates as a professional corporation can increase the likelihood of success. For one, knowing that they are protected from the negligence of other employees can increase the odds that you can bring more shareholders on board.
In addition, the number of tax benefits available to your business exceeds the number of deductions available to many other business entities.