The main reason most business owners form a legal business entity is to safeguard their personal assets. By incorporating, or forming a Limited Liability Company (LLC), you're free to conduct your business without worrying that you might lose a home, a car, or any of your personal savings because of a business liability. This is, in fact, one of the best moves you can make to protect your personal property when you own your own business.

Benefits of Incorporating & LLC Formation

Corporations and LLCs are separate legal entities that enjoy certain protections under the law and important benefits, too:

Reduce your personal liability.

If you operate as a sole proprietorship or general partnership, you're personally responsible for any business debts or lawsuits against your business. Basically, almost anything you own can be at risk. But owners of corporations maintain separate business and personal identities. So if you're incorporated, your personal assets are protected from any liability incurred by your business.

Save on taxes.

 Corporations are taxed at a lower rate than individuals. And when you're incorporated or an LLC, expenses like insurance or travel and entertainment, both for you and your employees, can be tax deductible as business expenses.

Improve your credibility.

 Put simply, an Inc. or LLC after your company name implies a real legitimacy to your business that will impress potential customers, vendors and lenders. It essentially says you're for real, you're committed, and you should command respect.

Attract investors.

Corporations are allowed to attract investors through sale of stock. And investors will feel much more comfortable if they're protected from any liability by virtue of your incorporation status.

Ensure continuity.

Corporations are enduring business entities. They have a business life that extends beyond an owner, principal or partner. Incorporating avoids any legal entanglements or even termination of the business in the event of long-term disability or death.

Transfer ownership easily.

Incorporation allows you to transfer ownership through simple sale of stock.

Share responsibility.

While you or a partner may be the ones making the day-to-day decisions, your board of directors (a requirement for incorporation) allows other major investors to review the business periodically and buy into decisions. This lessens the danger of any one or two individuals making a bad decision that could seriously hurt the business.

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About the Author:

Trina Newby is a Business Consultant, CEO & Founder of Women About Biz, a membership organization that provides small business resources, tools and networking opportunities for women.