A corporation is recognized by the law as an individual entity, separate from its shareholders (owners), and is many times treated as a human being. Its most important characteristic is the fact that shareholders, directors and officers enjoy limited liability for the debts, obligations and liabilities of the business as well as liability stemming from possible legal action. Protection of shareholders’ personal assets is one of the major reasons business owners choose to incorporate. Normally, shareholders cannot lose more than the amount they invested in the corporation. If the corporation goes bankrupt, the shareholders will not be liable for its debts. Should someone sue the corporation and it is found liable, they can take the corporation’s property to satisfy the judgment but if that property does not satisfy the judgment, they will not be able to take a shareholder’s personal assets, i.e. home, car, or a bank account. An exception to a shareholder’s limited liability exists when the corporation has recklessly harmed people or has been used to perpetuate a fraud. A corporation best serves owners who want both limited liability and a more formal business structure. |
7. In which state should I incorporate? |
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Click here to see what is included in the Corporate Kit supplied by MaxFilings. |