Why incorporate your business?

Setting aside tax considerations, the primary legal reason to incorporate your business is liability protection. Every state recognizes incorporation as a perfectly legitimate way for a business owner to seek to limit his personal liability for corporate obligations. That protection only goes so far, however, as corporate principals always remain liable for their own tortious behavior. For example, if you are a doctor or a lawyer, you can still be held liable for malpractice (professional negligence) even if you do business as a professional corporation or limited liability company. In addition, the business owner must take certain steps to increase the chances that the corporate form will be recognized (and not “pierced” in order to impose personal liability on the owner), including adequately capitalizing the business entity from the outset and maintaining corporate formalities, such as keeping minutes of regular directors’ and shareholders’ meetings. For more information on liability protection as a benefit of incorporating, read our article on The Benefits of Incorporating. For more information on piercing the corporate veil, check out our article on Reducing Risk of Alter Ego With Some Simple Things.