Subtitle: 
Every small business should carefully consider these reasons for forming a corporation or limited liability company.

 

Important Tip There are many reasons why a small business should be a corporation or an LLC. It is hard to think of any reasons why it should not.
  1. Limit Personal Liability. If you are operating a business, you have the potential for people to make claims or bring lawsuits against you. If you are properly incorporated or have a proper limited liability company, your personal assets will generally be protected from these claims and lawsuits.
  2. Clarify Ownership Rights. Forming a company also allows you to clarify ownership rights up front. In Facebook, for example, many different people ended up claiming ownership rights in the company. By creating your company early, you can clarify ownership rights upfront.
  3. Agreements and Leases. You can begin entering into agreements and leases in the name of the company rather than your own name. This is also a way to reduce your liability for the obligations of the business.
  4. Bankruptcy protection. If a small business fails, you may be able to take the business into bankruptcy in a way that protects your personal credit rating. In addition, bankruptcy limits your rights to take advantage of bankruptcy laws in the future – by using a company, you may avoid this.
  5. Obtaining Visas. Companies can receive visa for their employees – by having a legitimate company, you may be able to bring workers to the US under appropriate visas.
  6. Tax treatment on sale of business. If you sell a business within a year, you may be subject to short-term capital gains taxes. If you incorporate the company and sell stock in the company after a year of holding the stock, you are eligible for lower tax rates on your gain from the sale.

 

For more reasons and more detail on the reasons above, particularly in the high-tech area, please see http://www.startupcompanylawyer.com/2009/07/20/when-do-i-need-to-incorporate-a-company/

Additional Information
Important Tip: 
There are many reasons why a small business should be a corporation or an LLC. It is hard to think of any reasons why it should not.