Running your own business is often an all-consuming activity, between getting new clients and taking good care of the ones you already have. An extra dose of paperwork is probably the last thing on your wish list.
So you may be wondering:
Do I need to register my freelance business?
In this post, we’ll show you why it might be worth the time and effort to finally incorporate.
Here are 5 critical advantages to being incorporated:
1. Legal protection
When you incorporate your business, you’re able to legally separate your personal assets from your business assets. This means if you’re sued, the personal assets are off-limits. In other words, registering your freelance business ensures you won’t lose your home in a legal dispute!
You can choose to incorporate as either an LLC, S-Corp or C-Corp. All of these options allow you to reduce your individual tax liability. This is done by restructuring the way your income is officially reported and making more deductions available to you.
Put yourself into the role of a potential customer. Would you prefer to give your money to someone you found on Craigslist, someone who has a nice-looking website but is clearly doing this as a side hustle, or someone who has a professional presentation that involves an official “Inc.” or “LLC” next to their name?
We’re guessing that, like most people, you probably give ascending levels of credibility in the order listed above. Registering your freelance business allows you to tap into that credibility and present your business more professionally.
And the benefits expand beyond your potential customer base. It also applies to how financial institutions, investors and business collaborators will view your position in the marketplace.
4. Increased income
“Mo’ money, mo’ problems,” goes the saying. The cliché exists because it’s true. When you’re just doing your project as a “gig,” “side hustle” or “hobby,” with a few dollars coming in to supplement your income, then you’re probably fine on your own without incorporating.
But when revenue streams grow and this becomes a more important source of your income, then it’s time to get registered and tap into the above benefits.
This goes directly to the credibility issue. Whether you’re looking for a bank loan, angel investors or simply to hire people, the credibility that comes with incorporation is vital. Once you start this process, it’s time to register.
Making a decision on what type of business you want to register as and then doing the subsequent paperwork is time-consuming, but well worth it. It’s an essential first step to becoming a real player in your industry.