3 Reasons Your Consultancy Should be Incorporated
BY: CHITRAPARNA SINHA ON TUESDAY, JULY 18, 2017
Incorporating a consultancy has its benefits and it’s recommended that all consultants should have an official semblance to their business. It seems simple for consultants or freelancers to work as a “self-employed professional” for tax purposes. However, incorporation has its benefits for a small business owner. Let’s understand the concept clearly and its purpose.
What Is Incorporating?
Incorporating is the process of giving a structure to the business, both for business growth and legal terms. It’s like building a house. We won’t build a house without a proper blueprint. Incorporation is like a blueprint to the consultancy. Incorporation protects personal assets. As a self-employed person, the service and the proprietor are the same. The person is not separated from the business and hence, all the personal assets are attached to the business. Incorporation will add a layer of security to the personal assets. An incorporated entity attracts higher brand value, credibility, and trust rather than a person freelancing out of a garage. Potential clients prefer to work with an established entity. Depending on the nature of incorporation, there is tax flexibility, deductible expenses, and various tax benefits.
How to Incorporate a Consultancy?
Incorporation takes a couple of days, depending on the nature of the setup. There are various incorporation service providers. 1st Formations, for example, which incorporates most companies and is a member of ACRA, the Association of Company Registration Agents, which ensures that their company documentation process is compliant with the current regulations and legislations. With them, a consultant can create private limited companies, guarantee companies, limited liability partnerships. Once the company is incorporated, collect the documents and visit a bank for a business current account.
Still looking for reasons to incorporate? Here they are:
#1 Tax Savings
As a freelance consultant, the tax bracket is likely higher. Incorporating gives small businesses an opportunity to receive great tax benefits. The nature of tax benefits is determined by a thorough analysis of the consultancy business and a discussion with a certified tax professional.
#2 Tax Audit
Usually, the self-employed professionals are at a higher risk for tax audit because the government often feels that such professionals underreport their income and overstate the deductions. The Revenue department is always there to unearth the facts but why go there? After incorporation, the consultant establishes a separate business identity which is accompanied by a business current account. All the business transactions happen from that account and it’s trackable; hence, there are reduced chances of a tax audit.
An incorporated business is highly credible that self-employed freelancers. It gives an impression to potential clients that the business is established and serious about work partnerships. Whoever is behind the company is serious about career and livelihood. It adds a level of professionalism and potential clients will take notice of this.
Thriving Consultancy Business Niches
Here is the latest list of business niches where the consultancy business model works well.
#1 Advertising – Established companies and startups often hire consultants to create strategic advertising campaigns.
#2 Accounting – Every establishment, whether small or big, needs accounting consultant to handle their financial paperwork.
#3 Career Counseling – A hot trend globally, career counseling is in demand as corporate downsizing grips the blue-collar employment sector. People want guidance on future employment options.
#4 Human Resources – The last decade has seen an evolution in the HR field with more professionals becoming freelance HR consultants working in partnership with multiple companies on retainer value.
#5 Taxation – Like Accounting, Taxation consultancy is highly solicited. With the right marketing and business plan, you can become a high-value tax consultant professional.
Consultation is a high-value industry. Don’t remain a freelancer all your life. Incorporate the business and expand the business.
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