Читать книгу Small Business Taxes For Dummies - Eric Tyson - Страница 52

The chief reason to consider incorporating your small business is for purposes of liability protection. Attorneys speak of the “protection of the corporate veil.” Don’t confuse this veil with insurance. You don’t get any insurance when you incorporate. You may need or want to buy liability insurance instead of (or in addition to) incorporating (see the next section for details). Liability protection doesn’t insulate your company from being sued, either.

When you incorporate, the protection of the corporate veil provides you with the separation of your business assets and liabilities from your personal finances in most situations (gross negligence and bad faith being notable counterexamples). You must follow the ground rules, though, for being a corporation.

Why should you care about the separation of personal and business assets and liabilities? Suppose that your business is doing well, and you take out a bank loan to expand. Over the next few years, however, your business ends up in trouble. Before you know it, your company is losing money, and you’re forced to close up shop. If you can’t repay the bank loan because of your business failure, the bank shouldn’t be able to go after your personal assets if you’re incorporated, right?

Unfortunately, many small-business owners who need money find that bankers ask for personal guarantees, which would negate part of the liability protection that comes with incorporation. Additionally, if you play financial games with your company (such as shifting money out of the company in preparation for defaulting on a loan), a bank may legally be able to go after your personal assets. So you must adhere to a host of ground rules and protocols to prove to your state and the IRS that you’re running a bona fide company. For example, you need to keep corporate records and hold an annual meeting — even if it’s just with yourself!

A business can be sued if it mistreats an employee or if its product or service causes harm to a customer. But the owner’s personal assets should generally be protected when the company is incorporated and meets the other protocols for being a legitimate business just discussed.