5 Big Reasons to Register Your Company
I get it. You're running a business and you have 1000 things to do before breakfast.
You know you need to set up your business legally, but you're putting it off because youʼre too busy developing your products or services, shipping orders, running social media accounts, and all the things you need to do to make money.
But there are a few good reasons why you may want to take your biz legit:
1. Youʼre ready to move from hobby to serious business
If youʼre looking to turn this side hustle into your full-time job, then you need to set up your business properly. Why? Because setting up your business will help you make more money. It lets you keep more of your profits + grow your business. Finding the right company for your needs is going to save you money on taxes, registration fees, operating costs, and lawsuits.
But if youʼre not sure whether your business will be around in a year, then spending the time and money to set up a company may not be a good investment for you.
2. You want more dream deals
We all have dream deals in mind. Maybe it’s seeing your products on the shelves of the biggest stores like Nordstrom or Nasty Gal. Or maybe your dream is to work with an international distributor who sells your products in stores around the world.
Here’s the thing about those dream deals: they only work with real companies. These stores and distributors are placing huge orders, their customers really trust the products they sell, and they can’t afford to associate themselves with a flaky company. They’re not going to waste their time working with a company who isn’t serious enough to be formed properly. So if you’re ready to make those dream deals and work with real companies, then you need to be a real company, too.
3. You want to pay less taxes
If you’re looking to turn your side hustle into a full-time job, then you need to set up your business properly. Why? Because setting up your business can help you save big bucks in taxes. That means you can keep more of your profits + grow your business.
Plus, if you get audited, the fact that you have a registered company can prove that your business is real and allow you to keep claiming those lovely tax deductions. If the IRS determines that your business isn't real, then you don't get to deduct your business expenses anymore. That means you'll pay a lot more in taxes.
4. You want to avoid personal lawsuits
You’ve probably heard about something called Limited Liability. It’s what you get for registering your company with the state and following certain formalities. It's a big deal because without it, your personal assets (like your car, house, and bank account) are considered company property. That means they can be taken by creditors to pay your business debts. With limited liability, only your company assets are at risk.
This is especially important for businesses that sell products. Product injuries can happen and they are insanely expensive. So you want to have limited liability in place as soon as you put your product into the marketplace. Because it’s probably not a smart business decision to risk all your personal assets in order to save a few hundred dollars in setting up your company.
5. Youʼre interested in investors
If youʼre trying to attract investors to buy equity in your company or are interested in selling your company someday, then you need to be set up legally. That means everything from your registered entity to your intellectual property needs to be locked down.