Show #314 Airing Sunday, October 9, 2005
If you have a small business, or are self-employed, should you incorporate to protect yourself against lawsuits and creditors? If you decide to, should you incorporate somewhere other than in Ohio? Here to explain is a man who “incorporates” both extensive experience and wise advice, my law partner Mike Solomon.
Question: Should a person with a small business, even based out of their home, incorporate?
Answer: That depends on the circumstances. But a corporation, or a limited liability company, can provide a number of benefits. For example, a company can make it easier to pass the business on when you die or retire. And most important, it can protect you and your family from lawsuits and creditors.
For example, if not incorporated and are selling cakes from your home, someone chokes on a nutshell, they successfully sue you and collect millions.
Question: Does it matter where you incorporate?
Answer: I’ve seen many ads telling people to incorporate in Nevada or Delaware because those states offer more protection than Ohio.
For big businesses with many investors, this may make sense. Delaware, for example, has a specialized court for handling business cases. That court may be more favorable to businesses. It may be worth the extra travel expenses for a large company.
Question: Don’t Ohio courts handle business cases?
Answer: Yes, but they also handle many other cases. In Delaware, the business court only handles business cases. So the cases move faster, and the judges are knowledgeable in business law. Also, there are no juries to award huge judgments, and the judges tend to favor businesses.
Question: Is there any reason for a person with a small business to incorporate in Nevada or Delaware rather than Ohio?
Answer: Unless they like traveling, the answer is no. For most people, Ohio is fine. Being incorporated in Ohio will achieve your goal of providing protection against lawsuits and creditors, and the courts are more convenient. Most small businesses do incorporate in Ohio.
Question: I’ve heard that Nevada is great for keeping the business matters and owners secret:
Answer: That may be the primary advantage for incorporating in Nevada. In Ohio, it’s pretty easy for anyone to find out who the owners of your company are. In Nevada, it’s much harder, and that may make it harder for someone to sue the owners. It’s also harder for the IRS to get information about your business if it’s incorporated in Nevada. What happens in Vegas stays in Vegas!
Incorporating a small business offers protections. And Mike stated it pretty clearly: Unless you want to spend bucks unnecessarily, the Buckeye state is a fine state in which to incorporate. If guidance on the legal state of your business affairs would help your state of mind, give Michael Solomon a call..
