Small Business Incorporations
Small businesses are the lifeline of our country.
Many people begin businesses as hobbies which grow to sizeable
companies, some of which become multi-million dollar companies.
Whether a company is small or large there are two important factors:
the issue of personal liability and taxes.
Many people think that you only need to incorporate
if you are going to be advertising your products or services.
For example, someone who has a lawn mowing business may believe
that since most of their business is “word of mouth,”
it is not important for them to incorporate. However,
without incorporating it can be much more difficult to write off
necessary items for purposes of taxes. That person has also subjected
themselves to liability from a number of angles which may
include contract disputes related to agreements between that person
and a customer, or other liability related to personal injury.
Although obtaining liability insurance is one way
to protect your business, it typically does not protect you in
regards to contract disputes or if someone suffers an injury.
If damages are more than your liability policy
they will look to you personally for satisfaction of their damages.
People
who start their own companies are risk takers and are not afraid
to jump in to try to make something work. However, it is important
to understand that all risks should be calculated and there is
no one single thing more important than incorporating your business.
Many people create a business and later determine
that the business is of sufficient size or has entered into agreements
or actions which make the owner concerned about the issue of
liability. At this point, they contact our office and want to create
a business entity to decrease their chance of personal liability.
Unfortunately, by this time it may be too late to protect them.
If they have already “held” themselves out to their
customers in their own name as opposed to a company name, then
if there is a problem, they will likely be sued in their own name
and not the company name.
When a person incorporates, it is important for
all business to be conducted from that day forward in their
company name only. Whether you rent a building, lease space in
a building, buy products, or deal with customers, you must always
hold yourself out as the company name. Otherwise, you subject
yourself to personal liability. Personal liability means that
if there is a problem, potentially these landlords or customers
can come after you directly and can attach
liens to your home, or take other actions against you and your
family.
When business owners come to Sullivent Law Firm
and there is already some issue of concern regarding liability,
we do what we can. We determine which business entity is best
for that person, set up the appropriate company with
the name, and instruct the client
to immediately hold themselves out
in the company name only. Again, sometimes it is too late
and the owner of the company may still be personally liable
due to their failure to incorporate early. Don't let this happen to you.
If you are thinking about starting a business
or have a business but have yet to incorporate, please call us.
If you would like to evaluate different types
of business entities, please click here.
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