The Benefits of Incorporation
WSJ’s Kelly Spors has a Q & A section on their “Startup Journal”. This week it lists the above topic and answers the question:
I am interested in starting my own business but I want to incorporate for the tax benefits. Should I incorporate before I do anything with my business or wait until I have some equity built up? I am going to be focusing on real-estate and stock ventures.
And she answers:
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A compelling reason to incorporate, however, is the protection of personal assets that comes with it. If someone trips over a garden hose on one of your properties and sues, or the business falls into massive debt, your personal assets would be protected in court — as long as you can prove you’re upholding the numerous extra responsibilities and recordkeeping that come with being a corporation.David Hsu, a management professor at University of Pennsylvania’s Wharton School, says beyond liability protection, the decision to incorporate also means considering the “expected trajectory of the business,” such as how it will be funded and how long you expect the business to last. Small-business owners aiming to attract venture capital, go public, or turn their little computer business into the next IBM are prime candidates for forming a C corporation.
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[Read the entire answer here…]