If you're the owner of a
small business, you know all too well the risks involved in
running a company. If you fail you can
potentially lose everything you own. What's worse is that not
everything is in your control … changes in the general
economic environment can have a huge effect the demand for
your products or services, as well as on the cost of
providing them as well.
percentage of new business ventures fail, so it's important
that you protect your personal assets as much as
another predominant reason for small business failure is too
Rapid growth can cause cash flow shortages, for example the
costs of new equipment and stocks swallow up cash before
sales can be made.
All of the
above risks and scenarios are reasons why you should
consider small business incorporation for your
You can read about all the benefits of business
incorporation here, and about all the disadvantages of
But basically, as a small business owner, the prime
reasons for incorporating your business are to provide yourself
with limited liability protection, and secondly to assist with
your plans to grow your business.
Once you've established your business, you should
seriously consider incorporating it to protect your personal
Incorporation means you effectively give your business a
separate legal identity, and in doing so, you're personal
savings and assets are no longer at risk. Following incorporation the
amount you can potentially lose is limited to the amount of
share capital you have invested in the
Beyond that the business's creditors have no call on your
own assets, only those of the business.
Incorporation also provides your business with a formal
share structure that gives you the ability to value your
company easily, and to issue further shares in order to raise
additional capital when required for growing the
formal legal structure of the company also provides reassurance
and confidence to the financial institutions, should you need
to borrow towards your planned growth.
There are downsides to incorporation, but if you are
serious about longer term growth for your company, going down
the route of small business incorporation should be a serious
consideration for you.