There are two good reasons business owners should form a business entity – ASSET PROTECTION and CREDIBILITY.
Asset Protection: If you operate a business that is not registered with the Secretary of State, then you are operating as a sole proprietor or as a general partnership (if 2 or more individuals). In the course of your business, if you cause damage to property or a person, you could be sued. The defendant in this lawsuit will be YOU. If a judgment is rendered for damages, it will be against YOU – resulting in YOUR personal assets (e.g. house, car, bank accounts, etc.) being used to satisfy the judgment. Now, take the same example of a business that forms a corporation, limited liability company (“LLC”), limited partnership, or other similar entity authorized by the State. In this example, the defendant will now be the business entity and NOT you personally. Sure, the plaintiff can try and “pierce” the entity’s veil of limited liability, but that may prove to be a tough battle based on the legal limitations.
Credibility: Doing business as a corporation or LLC advances your credibility with your customers by minimizing skepticism as a potential fraudulent business. Registering your business with the Secretary of State shows that you have a legitimate business; therefore, instilling confidence and trust with customers and vendors.
How difficult is it to form an entity? Forming an entity is not complicated; however, it is recommended that you consult an attorney and CPA to assist with customizing the formal, governing document (e.g. Operating Agreement or Bylaws).
For more information on forming a business entity and minimizing personal liability, contact Bryson Law Firm, P.C. at (404) 909-8842 or email firstname.lastname@example.org.
Bryson Law Firm, P.C.: Suwanee, Georgia. Attorney Richard Bryson has over 15 years experience with investment entities, elder law, estate planning, probate, wills and trusts, tax planning, tax dispute resolution, asset protection, personal injury, business formation and governance, real estate transactions, and Medicaid and VA planning. Contact our Gwinnett County law firm at 404-909-8842 or email@example.com.