There are many things to consider regarding whether or not you should incorporate your sole proprietorship or general partnership.
Incorporation means that you are creating a separate company, a separate legal entity from which you are transacting your business. Incorporation can provide tax flexibility and tax benefits, as well as allow more deductible business expenses. But perhaps most importantly, incorporation can protect your personal assets because it allows you to separate your business assets from your personal assets. If you own a small business and are sued, you could lose everything that you had worked so hard for.
Some other benefits of incorporation:
•· Corporate tax rates are often lower than individual tax rates
•· Possible lower self-employment taxes
•· Possible additional tax benefits and deductions
•· Chance to increase your business growth since your company may be seen as more professional and credible in the eyes of potential clients or customers
•· Name protection and name recognition
•· Ability to issue stock options for increased capital
Incorporation can take the form of a corporation or a limited liability company (LLC), and there are tax differences between them. Further, under an LLC there are also differences in the tax elections (sole proprietorship, partnership, C Corporation or S Corporation).
You should consult a legal/tax professional for information on how to get started. He or she can guide you on what option is best for your situation.