Black Business Owners

5 Reasons Black Business Owners Should Incorporate Now

Starting a business doesn’t automatically equate to success for anyone – but Black businesses owners face additional challenges compared to businesses started by other racial and ethnic groups, like:

  • Lack of Funding: This is a common issue across the board for start-ups and new entrepreneurs, but because black business owners are also experiencing the racial wage gap and – according to the U.S. Census – have the lowest average American household income by race, they’re often subject to even more financial strain.


  • Lack of Mentorship and Social Capital: Research has long suggested that mentoring can make a massive impact on the success of a small business – with one analysis finding that founders mentored by a top-performing entrepreneur were three times more likely to become top performers. Because many of these relationships are often formed organically as part of our social and familial networks, black business owners can be at a disadvantage.


  • High Failure Rates: Despite the dramatic increase in the number of black businesses, especially ones that are owned by black women, black businesses still have some of the highest failure rates, compared to businesses started by entrepreneurs from other racial and ethnic groups. 

While many people may not see it as critical, especially in the early stages of a venture when money and time are limited, there are five reasons why incorporation can help be a buffer against these challenges.

1) Credibility: Many people are afraid of getting scammed, or spending their hard-earned money on a faulty product, a mediocre service or an item that never materializes. Incorporation is one of the first steps towards building credibility – by helping your potential customers believe that you are who you say you are, and that you’ll deliver on your brand promise. Credibility can be especially crucial in the early stages when you haven’t yet built any other testimonials or social proof.

2) Finances: Incorporating a business can almost immediately improve fundraising efforts for reasons similar to credibility building – people can now look to a brand to invest in, rather than a person that they don’t know. But it can also allow eligible businesses to access and pursue additional financial resources in the form of grants, and can allow them to accept donations from various parties – activities that will improve the financial viability of the business. 

3) Tax Advantages: This will ultimately be dependent on the type of business you choose to form, but some of the tax advantages of incorporating can include avoiding a higher tax bracket, drawing a salary, and deducting eligible expenses on your taxes – all of which equate to more money saved (or a more profitable business).

4) Personal Liability: Incorporating can protect your personal assets (like your savings accounts, car, and home) from being at risk if your business were to ever find itself in legal trouble – such as being sued or in the midst of a dispute. And regardless of industry, there’s always a possibility of liability when you’re doing business.

5) Access to Business Resources: Business incubators, networks, meet-ups, mentorship activities and other programs designed to connect entrepreneurs with valuable business resources, and to help them build social networks and capital, can be easier to access when you’ve incorporated. 

Fortunately, incorporating your business doesn’t have to be as daunting as it seems. In fact, it can actually be done in three steps. But if that still causes overwhelm, don’t worry – legal businesses, such as Rocket Lawyer, provide complete incorporation services, including document preparation and filing, and can help you connect with an attorney if you have specific questions, all at an affordable price. 

About Rocket Lawyer: Rocket Lawyer delivers legal documentation and attorney advice, anytime, anywhere, on any device. Since 2008, we’ve helped over 20 million businesses, families, and individuals obtain the legal help they need, at a price they can afford. That’s legal made simple.® Visit for a free trial.

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