Why form a business entity?
09 July 2013 / Video Blog / Comments Off on Why form a business entity?
Welcome to another edition of Tuesday Tidbits, where we make tax and accounting simple. I'm your host Charles D. Shapero, CPA with Widget Bookkeeping and Tax, and today we're gonna talk about why you might want to form a business entity. A lot of people when they start their own business they do a little thing on the side. And that little thing grows and grows and pretty soon it's big enough where the question arises, maybe I should form an entity. Should I have an LLC or an S-Corp? And why would I want to do that? Well the single biggest reason that you might want to form an entity is liability protection. WIth business, comes risk, your clients could actually sue you for something. I'll give you an extreme example: Let's just say that your business is renting houses, you own those houses in your personal name, god forbid you invest in a house that has a pool or is upstairs, because if somebody falls down those stairs or somebody drowns in that pool that could be a multi million dollar lawsuit and if you don't have that property in an LLC they can take everything you own. So it's a serious issue In that instance we probably want to have the LLC own that rental propery. In that situation if you have that multi-million dollar event. They'll be able to collect on your homeowner's insurance that you have on that property and then once they eat up all the assets that are sitting in the LLC, they can't come get your personal house, your personal car, your boats, that kind of that is protected. That's the single biggest reason you'd want to have an entity. And that concludes today's tidbit. See you next Tuesday! Widget Bookkeeping and Tax, Know more, keep more.
Tags: accounting, advantages of an LLC, bookkeeping, business entity, forming a business entity, record keeping, small business start up tips, tax, widget cpa