FREQUENTLY ASKED QUESTIONS
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What are some of the benefits of conducting business through a legal entity?
One of the most important benefits is the protection of your personal assets against the claims of creditors. Generally speaking, directors, officers, managers, members, and stockholders (the interested parties) are not held personally liable for the debts and obligations of the business entity. The interested parties should be limited in their personal liability to the amount invested in the company. Another legal benefit is the transferability of ownership, which can be done either in whole or in part. Also, some estate tax planning options are only available to business entities. Retirement funds, such as 401ks may be established more easily. Also, a business entity can acquire and establish its own credit rating.
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What are some of the mistakes people make when going into business?There are always risks involved in going into business. As most people know, a majority of small businesses do not succeed in the long run. Mistakes of new business owners may include the lack of a realistic business plan, underestimating costs and tax liabilities, and unfavorable business contracts/agreements. Even more problematic is a failure to understand the business or the marketplace, underestimating the competition, and/or not being effective at managing a business. Responsibility for these latter areas ultimately falls to the owners, but sound legal advice can substantially improve the chances of success.
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How can I be protected from liability claims that arise from my business?
Generally speaking, business owners doing business as limited liability companies, corporations, or limited partnerships do not have personal liability for the obligations or debts of the business. This assumes that no personal guarantees have been executed. If the business has been properly created, it is a separate legal entity. The details of formation are important, and the filing fees must be paid. If properly created and maintained, the assets owned by the business should be the only ones that are subject to debt or other liability considerations.