But start-up costs aren't the only deterrent. Small businesses also worry about complicated paperwork, confusing tax filings, and higher taxes if they become corporations. Yet the news isn't all bad. LLCs, for example, give the benefits of liability protection without the regulations that other types of corporations must abide by, such as holding annual meetings and keeping minutes of them. With an LLC, Sweeney says, "you can really get running and not concern yourself with the day-to-day management of a corporation." LLCs are now legal in every state, but many people are not aware of that, according to Sweeney.
Ultimately, success might be the biggest factor for small-business owners who finally make the jump from sole proprietorship to corporation. "People think, 'Why should I bother?' " Shane says. "Then the person makes a lot of money and suddenly says, 'I'm going to get incorporated.' "
