Why incorporate?
Answers:
A Corporation or an LLC can limit the financial loss a business sustains; however, that who is responsible for the day-to-day operations of the business can be held personally liable for the actions of the corporation.
So, if you own a construction company and destroy a home that homeowner can sue you personally (civil court) after they have sued your company.
There are certain tax advantages as well as to protect your own assets. The corporation becomes a legal entity and any suits against it do not effect the individual. A corporation may also purchase business insurance both from liablility and business interruption.
The individual cannot be sued for his personal belongings for the actions of the corporation.
yup -- in short when you incorporate you make the business its own entity separate from the owner. thats why corporate america is allowed to be so unethical.
Suppose you own a retail store where someone slips and falls on a wet floor and sues you. Or a restaurant where a diner bites into a toothpick that is accidently left in their food. If you are a sole proprietor, all your personal assets are up for grabs. If you have incorporated, only the assets of the corporation are available.
If you have done something intentional to defraud or harm a customer, then you could be sued personally and your assets are not safe. But if it is something that you have not personally done, you are most likely safe.
It really depends on why you are incorporating. The most common reason why someone incorporates is to protect their assets.
For example, businesses or investment properties should be put into an llc, or some other entity. The reason being is this: if something should go wrong with the business or a tenant gets injured on your property, only the assets in that entity are in danger... i.e. the business assets, or the property. but anything else in your name, such as your home, car, etc. is not in danger. It is the entity that can be sued not you as the individual. I can go on... it gets detailed!
This is informational only and should not be construed as legal advice. consult an attorney!
As stated in the previous answers people incorporate for liability reasons. You are correct in that if you as the employee of the corporation do something that causes liability you and the corporation will be sued.
People incorporate for liability protection as well as personal asset protection. If the corporation goes bankrupt no one can get to the shareholders personal assets unless they signed personal guarantees. Corporate law is much more settled than LLC law but as time goes on this is becoming less of a concern.
The problem with incorporating is that most people don't operate the corporation properly or they put appreciating assets such as real estate or stock investments into a corporation. This generally has adverse tax and estate planning consequences.
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