Small business owners just starting out have an important decision to make when it comes to choosing which business structure is most appropriate for their needs and goals. It can be confusing trying to determine this sort of thing on your own, especially if you aren't sure what the differences are between a sole proprietorship, a corporation, or any of the many other business structures. While a single article cannot hope to describe in detail the differences between all the various entities available to entrepreneurs, the following is a brief description of how structuring your business as a corporation provides significant benefits regarding liability.

Liability Regarding Your Personal Assets

The corporation business entity is simply unmatched in its ability to relinquish entrepreneurs of liability (see Business Liability Protection) regarding the business itself. If you manufacture coffee tables, for example, and one of your company's tables breaks and somehow injures a customer, your personal assets are beyond the reach of the injured person. Only the assets and income from the actual business would be subject to forfeiture. The corporation represents its own distinct and separate entity, and you, the entrepreneur, are not liable in any instance of litigation regarding business dealings.

Although this could be tragic for the entrepreneur who poured his or her life savings into a business venture, those whose personal wealth is greater than the value of the company can surely appreciate the protection afforded by a corporation structure.

Liability Regarding The Corporation Itself

As a separate entity, a corporation is also immune from litigation concerning your personal life. If, for instance, you are involved in a car accident and the other driver takes you to court, only your personal possessions and wealth will be at stake. The business, including all of its earnings, equipment, inventory, and land represent a separate entity that is in no way connected to you personally.

Ultimately, while a lawsuit of this magnitude could potentially cost you a lot of money or even result in the loss of personal assets like your home or vehicle, you can rest assured knowing that the company you built is safe, secure, and beyond the reach of those who would seek to liquidate it for damages.

In the end, the costs of incorporating are largely overshadowed by the benefits that such a business structure can provide to investors and owners. In terms of liability, there is no entity-structure that offers such comprehensive protection for both an owner's personal wealth and the value and income of the business. An experienced business attorney will be able to help you determine whether or not a corporation structure is most appropriate for your business, or whether or not you need such liability protection. 

For more information, contact Seiler & Parker PC or a similar firm.