Starting a business can be a profitable venture. However, there are also many risks to operating a business. Incorporating your business is one way to limit your exposure to these risks.

 

Should I incorporate my investment properties or business?

 

     One way to limit your personal liability is to incorporate your business or real estate investment. By incorporating your investment properties or business, you essentially create another entity that is separate from your personal property. In order to create a seperate business entity you must comply with all of your state's formalities and establish the required documents to govern your new corporation. After you are incorporated, if you are ever sued, and you have complied with the corporate formalities, creditors will only be able to reach the entity’s assets and will not be able to reach your personal assets, absent an exceptional circumstance.

 

What kind of entity should I choose?

 

     Factors to consider when determining the business structure that is appropriate for your business are: the number of owners, growth expectations, taxation, capital investments, management structure, etc. Below is a chart that highlights some of the distinctions between different corporate structures.

Corporate Formation