Disadvantages of Incorporating

Learn the disadvantages of incorporating your business

Among the disadvantages of incorporating are:

Your cost of doing business usually increases due to added fees you have to pay.
The amount of paperwork you have to do increases because of legal record-keeping requirements.
You may be subject to "double" taxation, having your profits taxed once at the corporate level and once again as an individual.
The IRS could limit your salary as an employee of your own corporation to an amount it considers reasonable and treat amounts above the "reasonable" salary to be dividends.

Your personal finances must be kept completely separate from the corporations finances. Thus, you can't dip into the corporate bank account if you come up a little short on personal cash for the week.
Closing the corporation's doors permanently can be somewhat complicated and costly.

Incorporation Facts

The preceding article is excerpted from The Home Office and Small Business Answer Book by Janet Attard. The book contains more than 800 answers to the most frequently asked questions about starting and running small and home businesses. For information about licensing this and other small business and startup content for your site, please send email to sales@businessknowhow.com

Latest Articles

Follow Us