What is Reverse Incorporation?

Reverse incorporation is a strategy investors use to save money on taxes and other costs. It involves transferring assets from a personal account to a newly created corporation, and then having the corporation purchase the investor’s existing business.

Why would someone want to do a reverse incorporation?

To save on taxes. Corporations are taxed at a lower rate than individuals, so by transferring assets to a corporation, investors can reduce their overall tax liability.
To reduce the risk of personal liability. When you own a business as an individual, you are personally liable for any debts or liabilities that the business incurs. By incorporating, you can create a separate legal entity that is responsible for its own debts and liabilities.
To raise capital. Corporations can more easily raise capital than individuals, so by incorporating, investors can make it easier to obtain financing for their business.

How do you do a reverse incorporation?

Create a new corporation.
Transfer your assets to the new corporation.
Have the corporation purchase your existing business.

It is important to note that reverse incorporation is not a simple process, and it is important to consult with a tax advisor and an attorney before proceeding.

Are there any downsides to reverse incorporation?

It can be expensive to do. You will need to pay legal and accounting fees to set up the corporation and transfer your assets.
It can be complex. The process of reverse incorporation can be complex, and it is important to make sure that everything is done correctly.

Overall, reverse incorporation can be a beneficial strategy for investors who are looking to save money on taxes and other costs. However, it is important to weigh the benefits and risks before making a decision.

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