Business Protection–Initial Considerations

May 15th, 2014 at 9:56 AM

The first consideration is structuring a sound asset protection plan is deciding which form of entity to operate your business. The possible choices include:

  1. General & limited Partnerships
  2. Sole Proprietorships
  3. Limited Liability Companies
  4. Corporations
  5. Trusts

Each has different legal characteristics, tax attributes, an asset protection features. The right combination is based upon:

  1. The nature of your business
  2. Whether there are outside investors
  3. The degree of liability protection needed
  4. And which entity creates the greatest tax breaks

For this article, let’s talk a look at Corporations. Its unique feature is that it issues shares of stock. Each share of stock entitles a shareholder to vote on the election of the board of directors, which is charged with the overall management of the corporation. The board of directors elects the officers of the corporation, president-secretary, etc., who are authorized to conduct the day to day business. Many states permit a single individual to serve as sole director and hold all the corporate offices. Corporation are intended to have perpetual existence. The death of an individual director of officer does not terminate the existence of the corporation. Instead, the corporation carries on indefinitely until it is dissolved b a vote of the shareholders.

A corporation is legally formed and begins its existence upon the filing of the Articles of Incorporation with the Secretary of State of the state of incorporation. You may incorporate in any state, it is not necessary to incorporate in the state where your business is located. Most large corporations are incorporated in Delaware which has a disproportionately large number of corporations. One reason is that Delaware has adopted laws that favor incumbent officers and directors from dissident shareholders, has a long history of decided court cases interpreting corporate law, and has no state income tax. These are attractive features to some.

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