If you’re just starting out your business, or even if you’ve been in business for a while, you may have thought about forming a corporation. However, you may not know what’s involved in incorporating a business, or what the benefits and risks are of incorporating. Fortunately, incorporation isn’t as scary or difficult as it’s sometimes made out to be, and your business may be able to benefit immensely by incorporating.
A corporation, put simply, is a legal entity that exists separately from both the people who own it and the people who run it. The corporation is not actually a person, of course, but due to something known as the legal fiction of corporate personhood, it is treated like one for the purposes of legal and financial liability. This means it has its own corporate income taxes to pay, it can own its own property and pay its own debts, and- most importantly- if your business is sued or becomes insolvent, the corporation is the one held responsible, not you.
However, there is a catch to this protection. For the legal fiction of corporate personhood to be maintained, you need to keep up with certain legal requirements for how your corporation is supposed to be run. For example, you need to appoint a board of directors and executives to run the corporation, and you need to hold annual shareholder meetings for everyone who owns stock in your company. You need to maintain bank accounts that are separate from your personal bank accounts, and you need to keep separate books as well. If you fail to do all this and you get into legal or financial trouble, the court may decide to “pierce the corporate veil,” as it is called, and hold you personally responsible for all the company’s liabilities and debts.
If you are interested in incorporating, you should get the guidance of an experienced business law attorney. Contact the skilled New York City business law attorneys at the Law Office of Tanya Hobson-Williams. Please contact us online, toll-free (866) 825-1529 or (718) 210-4744 to discuss your rights as a business owner and the solutions available to you.