The limitations of sole proprietorships
Many small business owners launch their companies as sole proprietorships. This means that you and your business are essentially one and the same. This also means that your assets and those of the business are also one and the same and both can be liable for debts and lawsuits.
Incorporation can provide you with legal shields
You can fix this by changing the structure of your small business to a corporation, which can offer personal protection against debts and legal judgments filed against the business. Most corporations created today are small businesses. Many have just one person as the sole shareholder, director and officer.
By incorporating you create liability protection and tax advantages for yourself and your company. That's because a corporation is legally a "person" and as such is separate from its shareholders, directors, officers and employees. If the corporation is sued, it can only lose the assets of the corporation — not the assets of its owners, directors and employees. People who sue the corporation generally cannot attach the assets of the shareholders. It limits the liability of the individuals associated with the company to their actual investment in the company.
Structure your business for success
You need to structure your business so you are prepared for any outcome — including a lawsuit, claims against one of your employees or other negative situations. Protect your personal assets while providing the protection needed for your business as well. Incorporation doesn't prevent lawsuits but does limit your financial exposure.
There are many incorporation options that can provide the liability limitations you need and the protection you want to assure. Always consult a business attorney to select the right option for you and your business.
And remember, Bagla Law is always there to help you with your business needs!
If you have any questions about these issues or other topics, please feel free to give me a call. You know your business – we know the law.
Talk with you next month,