Q: How will incorporating my business protect my assets?
While the person claiming money or some other relief will undoubtedly name you personally, a corporation offers an additional layer of protection by virtue of its separate legal entity status under the law. Legally it is a separate person for liability purposes. Not necessarily the only person, though.
You’ll pay initial legal fees and recurring accounting fees. You must comply with certain state meeting and recordkeeping requirements. You’ll also pay additional corporate taxes.
Unlike a simple sole proprietorship or general partnership that merely requires a fictitious business name filing with the local county recorder’s office, corporations are more complicated.
However if you take your corporation seriously, a court will too.
This means:
- Fully and completely finishing the entire incorporation process. Filing the articles of incorporation, preparing by-laws and first meeting minutes, issuing stock certificates, opening a separate bank account, and completing any federal, state, and local requirements.
- Maintaining the books and records required by federal and state agencies.
- Filing all official reports required by federal, state, and local agencies.
- Filing all federal and state corporate and personal tax returns, being certain they are consistent.
- Keeping corporate activities financially and operationally separate from personal activities.
Of course, consult with your attorney and accountant before incorporating.
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