When Is The Best Time To Incorporate Your Small Business?
If you’re a sole proprietor, perhaps you’ve considered incorporating your small business or self-employment activity.
And so maybe you’ve been wondering, “When is the best time to incorporate?”
From a legal standpoint, any time is the best time. The sooner you incorporate, the sooner you make the move from the world of unlimited liability to the world of limited liability.
From a tax savings standpoint, any time is the best time. The sooner you incorporate, the sooner you will start putting more money in your own pocket and less in Uncle Sam’s.
But from a **tax reporting** standpoint, there is one time of year that stands out as best: January 1st.
Why is that?
Assuming you have a sole proprietorship (or other entity, such as a partnership) that is up and running as of January 1, and assuming you then incorporate that existing entity on any date other than January 1, you face the possibility of filing not one but two business income tax returns for that year.
Here’s an example to clarify this important point . ....
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