INCORPORATING: THE KEY TO LIMITED LIABILITY AND PERSONAL PROTECTION

By Kelly Bagla, Esq.

Many small business owners launch their companies as sole proprietorships in which they and their businesses are essentially one and the same. However, changing the format of a small business to a corporation can offer personal protection in case debts or legal judgments are claimed against the business. Most corporations formed today are small businesses. In fact, many only have one person as the sole shareholder, director and officer.

The main reasons for people to incorporate today are liability protection and tax advantages, which can best be gained through the corporate entity.

As you probably know by now, a corporation is a legal person. As a legal person it is separate from its shareholders, its directors, its officers, and its employees. This means if a corporation is sued, all it can lose is what it holds.

People who sue the corporation generally cannot attach the assets of the individual shareholders. The corporation limits the liability of the individual persons who are associated with it to the extent of their actual investment in the company.

I cannot urge people strongly enough to be prepared. Prepare for the worst and hope for the best. It’s risky out there in the business world.

Incorporating doesn’t eliminate lawsuits but it reduces the depth of a person’s pocket.

There are many business entities that limit liability so before you incorporate always consult with a business attorney.

Please contact us if we can help you avoid these issues.

YOU KNOW YOUR BUSINESS – WE KNOW THE LAW