Will incorporating protect me legally?


My partner wants us to incorporate so we can’t be sued personally. But I heard that even if you are incorporated as a small business you are still liable for the actions of your employees, etc. So what gives?

Fearful in Phoenix

I’m not a lawyer, Fearful, and can’t give legal advice. But it is common knowledge that your partner is very mistaken. First, technically you can be sued for anything! No business structure can protect you from frivolous lawsuits. However, I believe what you are talking about above is called “piercing the corporate veil”. It is quite easy to do in a closely held corporation like most of us run. In a big lawsuit with whopping damages they can (and will) attack your personal assets.

What does this mean? One word. Insurance. Do NOT depend on any type of corporation to provide liability protection. Remember, the above was NOT legal advice. Just some a friendly chat about business! 🙂


P.S. Remember, I’m not slamming incorporation here. We were incorporated and it worked very well for us re: tax savings and accounting practices. But view the “liability protection” of incorporation as a bonus, not a substitute for good liability insurance.

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