This weeks Protect Yourself question comes from John. John just started a business and wants to know how to best protect himself.
Dear Jeff, I just started a new business. I have been told that it is best to be in a partnership with my friend. My attorney mentioned something about a corporation. What would be the best way to protect myself? – John
John, a partnership is like a second marriage. You are seeing that person all the time. You have to agree on almost everything and overtime, that can cause a lot of problems. I’m usually not a fan of a partnership. Marriage is tough enough! That being said, a corporation or LLC is the right way to go for two reasons.
1. A partnership does not protect your assets. People can sue and take your house in a partnership. If they sue your corporation or LLC, the can only take the assets of the corporation. A gives you a multi-billon dollar insurance policy, so to speak, with a corporation/LLC. You have no protection as a sole proprietor or partner.
2. By choosing the right corporation, you can get major tax advantages. It is best to talk to an attorney to find out which corporation is best for you and your business.
Cost of a Corporation
Incorporating your business usually costs around $1,000. Remember, you will also have to pay the Secretary of State $800 annually. However, that gives you a great insurance policy for just $800 a year! I think that is a great deal!
John, I hope that helps you and feel free to call my office to setup a free consultation to go over your business needs. Thanks for writing in!