To Incorporate or not, that is the question...

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To Incorporate or not, that is the question...

Postby Hey-Mr.DJ » Fri Jul 13, 2007 1:44 am

Can anyone advise on the pros and cons of incorporation? What costs are incurred?
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Postby dokai » Fri Jul 13, 2007 12:41 pm

In simplest terms, the single biggest reason to incorporate is so that your business assets are separate from your personal assets. In other words, if a speaker falls on someone's foot, they can sue the business (which owned the speaker), but can't take your home (which is owned by you.) It also makes it easier for the business to survive you, should you get hit by a bus or something, as the business is now it's own legal entity.

The down side that everyone focuses on is that you get taxed twice on the same money: the corporation pays taxes on it, and then when you get paid a paycheck, you pay income tax on it. However, there are tax breaks available to corporations that are not available to sole proprietors.

There are LOTS of different things to consider before making a decision. I highly recommend talking to an accountant or business lawyer regarding your business and what makes the most sense for you.
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Re: To Incorporate or not, that is the question...

Postby Hey-Mr.DJ » Fri Jul 13, 2007 2:47 pm

Doesn't liability insurance cover you for things like speaker "topplage"? If not, what DOES liability insurance cover?
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Postby dokai » Fri Jul 13, 2007 5:15 pm

Liability insurance only covers you for the amount of the policy, which for most of us is up to $2M per incident and up to $4M for the year. Someone sues you for $10M, you're screwed.

If they're suing the corporation, then they can cause the corporation to go bankrupt and liquidate all assets belonging to the corporation, but they can't come after your home, your IRA, etc. (Not if it's done right, anyway.)

By the way, I just ran across this article at another website:

http://legal.entrepreneur.com/2007/07/1 ... -lawsuits/
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Postby Dj Sean » Fri Jul 13, 2007 11:59 pm

It also depends what state you live in. I know getting incorporated in Nevada is a lot cheaper than a inc. in California. In Cali. its around $800 a year just for the inc. title. Forget what it is in Nevada, though I know its much cheaper.

I have no idea about Milwaukee. You can always check out the IRS site it has tons of info, so does wikipedia.org I'm sure.
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