How does incorporation protect

Consult your attorney to determine how the law applies to your situation. In general, though, some factors that a state considers when determining whether a corporation is transacting business in a state include:. Note that simply transacting business via mail order or the Internet typically does not equal transacting business; however, the determination is made on a case-by-case basis. Again, consult your attorney for specifics, as this list is not intended to be comprehensive.

How Incorporating Affects Funding If you plan to seek investment, the preferred entity of most investors and VCs is the C corporation, which is the standard corporation formed by incorporating. Limited Liability Companies, Limited Liability Partnerships and other entities are not favored due to the variation in rules between states and because they do not have the legal structure of shareholders, a board of directors and officers, which are standard components of investment.

If you have less than 35 shareholders, you'll probably want to elect to be an S corporation for tax purposes. You must file the election form within a short time after incorporating, so be sure to check with the IRS regarding the filing and the deadlines.

If you need to expand beyond 35 shareholders in the future, you can change your tax status back to a C corporation to do so. Anytime you're dealing with investor-related agreements and stock grants, you'll want to work with a securities attorney. These areas are complex and vital to making sure you retain control and future benefits from your company.

As a side note, the attorney you work with usually should not be a shareholder or a board member of the company. If he or she suggests this, then you should discuss the Professional Responsibility Rules of his or her State Bar with the attorney, phone the State Bar attorney complaint line to discuss the situation and make sure his or her actions are ethical.

After You've Incorporated Once you're incorporated, be sure to follow the rules of incorporation. If you don't, a court can pierce the corporate veil and hold you and the other owners personally liable for the business's debts. It is important to follow all the rules required by state law.

You should keep accurate financial records for the corporation, showing a separation between the corporation's income and expenses and that of the owners'. The corporation should also issue stock, file annual reports and hold yearly meetings to elect officers and directors, even if they're the same people as the shareholders.

Be sure to keep minutes of these meetings. On all references to your business, make certain to identify it as a corporation, using Inc. If you wish to seek legal advice, contact us today. Is your business incorporation actually protecting your personal assets?

October 19 One of the benefits of incorporating your business in Canada is that you can protect yourself and your personal assets from any liabilities. The benefits of incorporating go beyond finances. Suppliers, customers and business associates often perceive corporations as being more stable than unincorporated businesses. Corporations are the most enduring legal business structure.

A corporation can continue indefinitely, regardless of what happens to its individual directors, officers, managers, or shareholders. This means that by incorporating your business, you may be able to avoid the legal entanglements that could result with other business structures. A corporation can offer anonymity to its owners. As a separate legal entity, a corporation is taxed on its profits.

A corporation has the longest lasting legal business structure. If a sole proprietor or partner dies the business ends or it may become involved in various legal entanglements. Since a corporation is considered a separate person, it may continue regardless of what happens to its shareholders, officers, or directors. If the person opens as a sole proprietorship, the person will clearly be identified as the owner.

Also, if the person is involved in a partnership, this usually becomes a matter of record. Protecting businesses is our top priority here at the Elia Law Firm. And setting up corporations is just one way we do that. You can, but there are risks of going it alone. See Why…. In short, we take risk out of risky business. All rights reserved.