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

Advertisement:

Incorporate your business the easy way:

Copyright 1993, 2000, 2004 by Janet Attard. All rights reserved.

About the author:
Janet Attard is the founder of the award-winning  Business Know-How small business web site and information resource. Janet is also the author of The Home Office And Small Business Answer Book and of Business Know-How: An Operational Guide For Home-Based and Micro-Sized Businesses with Limited Budgets.  Follow Janet on Twitter at http://www.twitter.com/JanetAttard.

 
Free small business newsletter
 
Get great business ideas and advice like this sent to you in email twice a week.
 
Subscribe to the free Business Know-How newsletter. 
 
Enter your primary email address below

 

Follow Us and Share