2006-08-23 13:56:13 · 9 answers · asked by Richard C 1 in Local Businesses ➔ United States ➔ Other - US Local Businesses
Although as others have indicated, limitation of liability is the chief reason one incorporates, be advised (correcting what others have posted):
(a) You have no protection for liabilities you personally sign for
(b) The IRS can and will look to the principal(s) behind a corporation for income tax issues
(c) As a NEW business, you will likely have to sign personally on leases, mortgages and trade debt.
(d) If you fail to observe corporate formalities in how you operate (i.e., no separate bank account, no resolutions, etc.) your protections will be vulnerable to attack by creditors.
Another reason folks incorporate is that if your business is the going concern of more than one person (and that person is not your spouse) you are in a partnership. Partners are jointly and severally PERSONALLY liable for their respective actions in operations of the partnership. Incorporation and proper corporate operations serve to cut off this liability, except to the extent of your investment (and as mentioned above)
Good Luck
2006-08-23 15:00:34 · answer #1 · answered by TIG-PVB 1 · 0⤊ 0⤋
If you incorporate your business, then the business becomes an entity which you actually work for. You no longer own it but are the CEO of the business. If for some reason, someone would sue you regarding the business, they would need to sue the business, not you. If they win, they could only receive a settlement from the business, i.e. everything goes under the business name and they can't touch your home, your possession's, etc. If the business has no assetts, they can't collect more than what the business has in assetts. You file corporate taxes and actually pay yourself a paycheck.
2006-08-23 14:01:43 · answer #2 · answered by Chick with pets 4 · 0⤊ 0⤋
Incorporating protects your personall assets. As a sole propriator you business assets are linked to you personal assets such as you home and personal savings account. Should you ever go under, have IRS issues, or need to file bankrupcy for the business your car, home, personal savings and even retirement accounts would all be lumped in with the business assets. A corporation is a fictious person, a seperate entity from yourself so only its own assests would be levied should the business fail.
2006-08-23 14:00:20 · answer #3 · answered by cerwenna 2 · 0⤊ 0⤋
2 main reasons I can think of
First to limit your personal liability exposure and secondly to lower the rate of taxation as business improves and you start moving into higher tax brackets.
2006-08-23 13:59:45 · answer #4 · answered by Norman 7 · 0⤊ 0⤋
It's better all around for protection against asset loss, tax purposes and all sorts of other practical reasons.
2006-08-23 13:58:40 · answer #5 · answered by Anonymous · 0⤊ 0⤋
What Stuart said!
2006-08-23 13:59:03 · answer #6 · answered by Traveler 3 · 0⤊ 0⤋
to protect your assets from law suits
2006-08-27 03:23:36 · answer #7 · answered by thirsty mind 6 · 0⤊ 0⤋
depending on your jurisdiction, it will protect you from liability and may increase the oppertunity for bemefits.
2006-08-23 13:58:47 · answer #8 · answered by Anonymous · 0⤊ 0⤋
So when you go belly up, you won't lose you house, car and all of your pocket change.
2006-08-23 13:58:03 · answer #9 · answered by Stuart 7 · 0⤊ 0⤋