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Should You Incorporate Your Business?

Posted Wednesday, August 27, 2014 by Ada K. Wong

alt textMore and more businesses are incorporating in Washington state today.

If you are a sole proprietor or in a general partnership, you may be putting your own finances at risk, including your family’s if you do not incorporate your business. If you are operating as a sole proprietor, you are entirely and personally responsible for your company’s actions. Most businesses, if not all, should already have insurance, but that does not negate the consideration of incorporating your business. Unfortunately, more often than not, insurance policies will not cover the full amount of a judgment.

If you want to safeguard your assets and your family’s assets, you should consider forming a corporation or a limited liability company (“LLC”). Upon incorporation, any creditors of your business are automatically restricted to only having a claim against your business assets. There are a few exceptions to this, such as piercing the corporate veil. Typically, the corporate veil is pierced when the injustice is one involving fraud, misrepresentation, or some form of manipulation of the corporation to the owner’s benefit and creditor’s detriment.

Another plus about incorporation is that it is one of perpetual existence, meaning that the business can continue to exist even if ownership or management changes. If you are the only person running the business and it is not incorporated, if anything happens to you, the business usually just ends. Corporations and LLCs may also deduct normal business expenses, such as salary, before allocating income to its owners.

If you have any questions about whether or not you should incorporate your business, feel free to call Chris Thayer at (206) 805-1494 or Ada K. Wong at (206) 805-1493.

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