The primary reason to incorporate is to protect yourself.
Its not just risk of suit. If you are a sole proprietor and you run
up bills you can’t pay, yeah they can come after your personal assets
but remember also that the record of judgement would be in YOUR name,
meaning any business judgements would be on your personal credit
report for years.
Incorporating creates a new legal entity that is separate from
yourself. Businesses (suppliers, landlords etc) considering your new
corp for credit will still use your personal ratings for the
decision of whether to extend you(as a closely held corporation) that
credit or not but they cannot reach your personal assets in the event
of default unless you have been so careless about acting like a corp
that they can ‘pierce the corporate veil’.
It does cost more money to be a corp, both at filing and recurring.
The protection is well worth it if you assess your personal risk as
significant. Obviously we never believe we’re going to fail when we
start-up but its crucial to plan for that eventuality. Because it
happens, alot. I may sound like a broken record but planning for
disaster helps you avoid it. Think Titanic, lifeboats.
If you’re going to be in the jelly bean concession business I’d say
sole prop is fine. If you’re in the nation wide jelly bean
manufacturing and distribution biz then Inc, definitely.
But you should also look at LLC, limited liability company. This
affords you the protection of a corp but taxes you like a sole prop.
Your company doesn’t pay income taxes, just you. taxed once. Nice.
There’s lots more pro and con, really depends on the business and