Daycare is a business.
A daycare can be a thriving business, as there are always busy parents who need children to be looked after. Polls conducted by the National Association of Child Care Resource and Referral Agencies show that more that 11 million children under the age of 5 are in a some form of daycare. On average, American children spend more than 36 hours per week in daycare. The polls also showed that over 300,000 daycares operate formally as a business. According to the U.S. Bureau of Labor Statistics, the industry is expected to grow.
Protection from Personal Liability
Protect yourself and your assets from liability. If an accident were to happen and the business was unincorporated, there are many people who might be at fault, for example, the owners or the employees. As such, if an injured party seeks restitution, it will do so against individuals. If liability is found, all the assets of those parties could potentially be vulnerable.
When a business is incorporated, it is the business that gets sued in the event that something goes wrong. Only the assets of the corporation are vulnerable, which can be minimal, if the owners are running an efficient business and funneling out any liquid income.
Creating a Tax Shelter
Research your jurisdiction's taxation laws. Depending on the jurisdiction, individuals will be taxed on their income at graduated rates. Corporations typically pay less tax on income than the highest individual tax bracket. Thus, if the daycare business is earning an amount that puts the individual in the highest tax bracket, a corporation may pay less tax on the same amount.
Continuous Existence
Plan for the future with more certainty. Incorporation will add more certainty to the structure of the business, which will make it easier to plan for future events. If key personnel involved in an unincorporated daycare are unable to continue, it could mean the end of the business. A corporation, however, will continue on, and the ownership will pass to the heirs of the owner or owners. Although there may be a period of personal adjustment for those involved, the corporation can continue to operate.
