Ask the typical small-business
owner to name the main advantage
of being incorporated, and the
answer will probably be "limited liability"
—the unique ability of a corporation
to shelter a business owner's
personal assets from liabilities arising
from the sometimes risky business of
Unfortunately, this typical owner
might be in for a rude awakening
when the company is sued. The corporation
that was going to provide
protection might be disregarded by
the court, and the owner held liable
for the debt.
You Must Play by the Rules
A corporation provides limited liability
because, in the eyes of the law,
it exists as a separate "person." This
fictitious person, however, lives and
breathes only if you play by the rules.