For many people who own their own businesses, they have found that working for themselves is far more rewarding than working for others. But, they’ll also probably tell you that it’s a lot more work. There are a number of ways that individuals can own their
own business: sole proprietorship, partnership, corporation, LLC, etc. The way your businesses is established could mean a lot on tax day. Some forms of ownership, like partnerships and S-corporations, have their business year end at the same time as individuals do: December 31, or the end of the calendar year. However, C-corporations can choose when their year ends. This could amount to a large difference as far as taxes are concerned. “Incorporation” doesn’t mean a huge building with hundreds of employees, with you at the helm of a multinational enterprise. A corporation is an entity without a soul, a few legal documents that reside in a file folder at your attorney’s office. But should you incorporate your business? Can you even consider this as an option? The answer to the second question is almost always yes. Although there are associated costs with incorporating, incorporating your business may be the best option from a tax standpoint. (Though you may find that your business is better suited to another form of ownership.) You just have to follow the rules that go along with it. But what if you work for someone else? Can you still incorporate? The answer is still yes, as long as you have income other than your employment income. For example, if you own some rental property and derive an income from that property that is separate from your work income, then it may be in your best interests to incorporate your side business of owning and running the rental property. Business owners are allowed to pay their expenses before they pay their taxes. This is something that employees aren’t allowed to do. Look at your most current
paycheck stub. What is the first thing that comes out of your pay? If you invest in your company’s retirement plan, that does. Otherwise, taxes come out first. And by taxes, I’m including federal, state, local, and Social Security taxes (FICA). Then the rest of the money goes to you, and you try to use it in the wisest way possible. With business entities, it earns as much as it can, spends as much as it can, and then is taxed on the rest. In this manner, business entities, such as corporations, are probably the biggest tax loophole left! By owning your own corporation, or being selfemployed, even everyday things, such as car payments and gas for your vehicles can become business expenses. You just have to use your pretax dollars from your business for these things.
An important advantage to incorporating is to protect your personal assets. What if one of your tenants from your rental properties sued you? If you incorporated your rental property business, then the tenant would be suing the corporation, not you as the individual. But if you hadn’t incorporated, you, the individual, would be sued. How accepting are you of losing your personal property in a lawsuit?
For many people who own their own businesses, they have found that working for themselves is far more rewarding than working for others. But, they’ll also probably tell you that it’s a lot more work. There are a number of ways that individuals can own their own business: sole proprietorship, partnership, corporation, LLC, etc. The way your businesses is established could mean a lot on tax day. Some forms of ownership, like partnerships and S-corporations, have their business year end at the same time as individuals do: December 31, or the end of the calendar year. However, C-corporations can choose when their year ends. This could amount to a large difference as far as taxes are concerned. “Incorporation” doesn’t mean a huge building with hundreds of employees, with you at the helm of a multinational enterprise. A corporation is an entity without a soul, a few legal documents that reside in a file folder at your attorney’s office. But should you incorporate your business? Can you even consider this as an option? The answer to the second question is almost always yes. Although there are associated costs with incorporating, incorporating your business may be the best option from a tax standpoint. (Though you may find that your business is better suited to another form of ownership.) You just have to follow the rules that go along with it. But what if you work for someone else? Can you still incorporate? The answer is still yes, as long as you have income other than your employment income. For example, if you own some rental property and derive an income from that property that is separate from your work income, then it may be in your best interests to incorporate your side business of owning and running the rental property. Business owners are allowed to pay their expenses before they pay their taxes. This is something that employees aren’t allowed to do. Look at your most current paycheck stub. What is the first thing that comes out of your pay? If you invest in your company’s retirement plan, that does. Otherwise, taxes come out first. And by taxes, I’m including federal, state, local, and Social Security taxes (FICA). Then the rest of the money goes to you, and you try to use it in the wisest way possible. With business entities, it earns as much as it can, spends as much as it can, and then is taxed on the rest. In this manner, business entities, such as corporations, are probably the biggest tax loophole left! By owning your own corporation, or being selfemployed, even everyday things, such as car payments and gas for your vehicles can become business expenses. You just have to use your pretax dollars from your business for these things. 
An important advantage to incorporating is to protect your personal assets. What if one of your tenants from your rental properties sued you? If you incorporated your rental property business, then the tenant would be suing the corporation, not you as the individual. But if you hadn’t incorporated, you, the individual, would be sued. How accepting are you of losing your personal property in a lawsuit?
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