The short answer, is yes. Clients frequently come to me, after they are in the midst of a business dispute, and it turns out that they are operating their business without having incorporated. As a result, all of the obligations that have been incurred in the course of their business are theirs personally. In the event they were to lose the litigation, and a money judgment is entered in favor of the other party, the liability on the judgment would be theirs personally and, worse, if they are unable to make payment on the judgment, their personal asserts are at risk to satisfy the judgment, including their home.
Incorporating generally removes this risk of personal liability. Obligations incurred in the name of the incorporated entity are the responsibility of the company, and absent fraud or other certain extenuating circumstances, a judgment against that incorporated entity is not enforceable against the owner.
While there are some initial fees to incorporate and some ongoing paperwork and practices — and there are differences from state to state — it almost always makes sense to incorporate, rather than operate a business as a sole proprietor.
THIS BLOG IS FOR INFORMATIONAL PURPOSES AND IS NOT INTENDED TO BE LEGAL ADVICE. CONSULT YOUR ATTORNEY.
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