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Incorporate in 2005 or 2006?

Date: 12/21/2005 | Category: Business | Author: developers

The end of a calendar year and the beginning of the next are typically the highest volume periods for formations of corporations. Many entrepreneurs looking to incorporate may be questioning whether it is better to incorporate now or wait until 2006. Here are a few advantages to incorporating in 2005 and 2006 respectively.

If incorporate in 2005:
(1) All corporate expenses incurred in 2005 can be deducted.
(2) Ensures that protection of any assets relating to the corporation occurs on a more immediate basis.
(3) Your corporation can list an established date of 2005 which can be of significance to companies wishing to work with businesses that have been around for a while.

If incorporate in 2006:
(1) Processing fees and tax liabilities are delayed until your 2006 returns are filed.
(2) You can take advantage of the capital expenses of incorporating in 2006 and deduct non-capital expenditures in 2005.
(3) All start-up expenses associated with your enterprise are classified as organizational expenses. They are capitalized as a fixed asset on your balance sheet and amortized over a period of 5 years. As a business owner, that means that all expenses you incur in forming a corporation are defined as organizational costs, and application of the depreciation expenses begin in the year you form the corporation. An argument can be made as to why you should use up tax-deductible, depreciation expense in 2005 if you are not likely to generate income under your new business structure until 2006?

The Decision is Yours

There is still time to incorporate in 2005 if you choose, but remember that time is running out. You must file your incorporation paperwork prior to December 28th, 2005 in order to take advantage of the 2005 incorporation date.

If you decide to wait until January 2006 to form your new entity, you can still start the paperwork now. Incparadise offers clients a “delayed filingâ€? option. With a delayed filing, Incparadise will complete all your paperwork and submit all documents to the appropriate state office, to be held for filing until January 1, 2006 or thereafter.

For more information on which option is best for you, contact today. Come discuss business in Small Business Forum.