So, why form a corporation or LLC in the first place, instead of just operating as a sole proprietorship?
Perhaps the most important reason is to safeguard your personal assets against creditors and lawsuits. Without a corporation or LLC, anyone suing your business is actually just suing you personally, putting everything you own (house, cars, bank accounts) at risk of being seized in a judgment. They can claim it’s not personal, but it sure will feel pretty up close and personal. Sole proprietors are personally responsible for all the liabilities of the business, such as loans, accounts payable, and potential lawsuits. In a Delaware LLC, however, members and managers typically are not liable for the company’s debts and obligations. You can also use a Delaware LLC to hold your personal assets like a house, car or boat. If you are ever personally involved in a lawsuit or bankruptcy, these assets cannot be seized. Additionally, regardless of your current personal credit standing, you can build up a separate credit history for your Delaware LLC simply by applying for and using corporate credi
Related Questions
- So, why form a corporation or LLC in the first place, instead of just operating as a sole proprietorship?
- Can I convert my sole proprietorship or partnership to a limited liability company (LLC) or corporation?
- What are the differences between a sole proprietorship, a partnership, an LLC, and a corporation?
