Understanding Incorporation
Incorporating separates your business assets from your personal assets to prevent your savings, home, retirement and other personal assets from being targeted by any lawsuit against your business. In addition, incorporating may create additional tax deductions that could put money back on the bottom line of your business.
One of the main reasons to incorporate is for the liability protection. A corporation is a legal entity separate from its stockholders, officers, directors and employees. So, if a corporation is sued, the only assets that can be lost are the ones it owns. Risk is everywhere and knowing how to protect yourself is the key.
There are a number of good reasons to protect personal assets by using state law to create separate financial entities. Perhaps the most sought after benefit of incorporating is the ability to separate personal assets from business assets legally by establishing a corporate veil. The corporate veil prevents lawsuits and other adverse actions against a business from targeting the personal assets of the business owner.