What is a
Corporation?
A
corporation is a legal "person" created separately from
those who own and operate it. As an artificial "person", the
corporation's debts and taxes are separate from its owners
(shareholders), thereby, offering the greatest personal
liability protection of all business structures. And because
the corporation continues to exist even after the death of a
shareholder, it offers tremendous estate planning
advantages.
Why
Incorporate?
Incorporation can offer your business many advantages! In
addition to liability protection, incorporation can also
mean attractive tax advantages, prestige, the road to better
financing, and the ability to raise cash through the sale of
stock. Corporations can also be used to own real estate,
automobiles, yachts, or aircraft for further asset and
liability protection.
Business
Owners Risk It All By Not Incorporating
While most sole
proprietors know that incorporation can shield their
personal assets in the event of a frivolous million dollar
“wrongful-whatever” lawsuits, many are lulled into
complacency by the “it-won’t-happen-to-me” attitude.
Unfortunately, this thinking has resulted in tremendous
losses by too many unprepared business owners. In addition,
what many sole proprietors fail to realize, is that it
doesn’t take a catastrophic lawsuit to wipe out everything
they own. There are more common business events that can
equally affect sole proprietors, leaving their personal
assets fully exposed. As a sole proprietor, consider what
would happen:
-
If one or more of your largest customers ceased paying
their bills or filed for bankruptcy.
-
If new technologies rendered your product or service
obsolete.
-
If competition, new legislation, or market conditions
cut your business in half-or more.
-
If you suddenly became ill or incapacitated.
Would you be able to
satisfy all of your debts, without losing all your personal
assets in the process?
Additionally, remember
that existing assets (bank accounts, your home, cars, etc.)
aren’t the only targets in a lawsuit. Unrealized assets such
as future earnings, inheritance and insurance settlements
are all potentials-for-loss in the event of an unfavorable
judgment.
If limiting personal
liability for the debts or claims against the business is
important to you, incorporating the business would generally
be a significant enough reason to incorporate even the
smallest of businesses.
Lawsuits follow the
money
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