Should I Incorporate?

I get many clients telling me that they want to incorporate or form an L.L.C. for their latest crazy business idea. If they’ve done their homework and we find that a corporation is right for them, I’m always glad to assist them.

However, if they are forming an entity because they heard from their father’s brother’s nephew’s cousin’s former roommate that it’s a good idea, I would advise that they take a step back and really take an objective look at the pros and cons of forming a corporation.

Small Business Trends has a great article discussing the benefits such as tax benefits and the ability to raise capital, in addition to the personal liaiblity protection aspect, but it also addresses the costs and administrative burdens of a corporation.

June Walker Tax Blog also tackles this issue for a reader, and advised for that reader’s situation, that they should not “incorporate until three weeks was really, really a lot of money.”

Sorry, It’s Personal

She also makes another good point: whether you decide to incorporate or not, it is really a decision based on the circumstances of the business and the principal(s) involved. In fact, I know of several businesses that are high liability businesses that are not incorporated because it doesn’t make sense to them, but have protected themselves through other means (e.g. liability, malpractice insurance, etc.).

I’d like to hear from my readers: are you incorporated? Why or why not? If so, was it the right decision at that time?