Why Do Businesses Incorporate?

Incorporating your business can simply help you to feel more professional and potentially be taken more seriously. However, there are many reasons to incorporate and your decision will depend upon your personal circumstances and the state of your business.

While you may not be ready to incorporate now that does not mean this will always be the case. If you are considering incorporating then you should speak to a professional for advice on how to incorporate.


The most obvious and common reason to incorporate your business is the reduction of financial risk to yourself.

If you operate as a sole trader then you are liable for any liabilities of the business. The law does not distinguish between you and the business; anything your business owes is effectively owed by you and it is possible to lose your own possessions; including your home.

As soon as you incorporate the business is seen as a separate entity to you. This means your personal financial assets are safe; the only funds you can lose will be those invested in the company.


In some cases you will need a license to incorporate. Certain trades, such as medicine and architecture require you to gain a special license before you can complete the incorporation process. This is because the services offered are more personal in nature and higher risk. Of course this will make it more important for you to incorporate if possible.

Business Transfer

You will probably have started your business with the aim of building it and running it for life. However, your needs, drive and desires change over time. In the future you may find yourself dedicated to pursuing other interests and new ventures.

Incorporating will allow you to access your funds, through the proper channels and remove yourself from the business if necessary.

This is an excellent idea when you start a business in partnership with someone else; there is a good chance you will want different things in the future.


Tax is a complicated area of law and it is best to get professional advice on this. However, you will generally find that you are better off incorporated.

This is because the profits made by the business will be taxed on the business and there will be a range of deductions which can be made against them. If you are not incorporated then these profits are considered your earnings and can invoke a high level of tax.

Being incorporated you will only be taxed on the income or dividends you draw from the business and these will be subject to the standard tax thresholds; saving you and the business money.


As you grow and expand your business you will notice that people provide you with more respect and see you as professional when you run an incorporated business.

In short, being incorporated allows you to appear credible as a business making you someone that other businesses and customer want to deal with. This is because you are publically registered and accessible; people can see you have a physical location.

If you are considering incorporation then you are probably ready to do it; get professional help today!