The primary reason people incorporate (whether the business is part or full-time) is for liability and asset protection. Whether the business is a full-time business or one that is done as a side-business, the risk of exposure to liability or someone trying to tap personal assets for a business-related legal issue is the same. People don’t want their house or personal property to be exposed to business risk – from creditors, customers or vendors. The corporate “veil” afforded corporations and LLCs may even be more important with part-timers, given they also have income from an independent source which should be protected.

Many business owners, however, are under the mistaken impression that they are completely protected from personal liability by filing Articles of Incorporation, for a corporation. This is not true. The mere process of incorporating does not completely protect the business owners or shareholders. To lessen the likelihood of such personal or shareholder liability you should make sure to adhere to certain procedures.

First of all, always use the corporate name whenever you are doing business. This clearly separates your business as a separate corporate entity. Second, follow all corporate formalities. Follow your bylaws, make sure there is proper issuance of stock, and record minutes in your meetings. Make sure to also keep your funds totally separate from that of your business. Corporate funds and the funds of the individual shareholders should never be in the same account. Also, keep all taxation separate. Corporate tax should be paid from corporate accounts, not personal ones. Making these distinct separations will clearly distinguish your corporation as a unique entity not connected with its owners and shareholders for liability purposes.

Starting a new venture is not always easy and the legal nuances can sometimes be overwhelming. There are inexpensive services that can be used – you don’t have to do it all yourself. Protecting your business legally is an important step in the process, but it doesn’t have to be confusing. Once it’s done, you can move on with the day-to-day management and development of the business and not have to worry about the legal stuff . Mycorporation can help you form a corporation or LLC at a much lower cost than hiring an attorney letting you focus on the growth and success of your new business. Learn about the difference between an LLC and a corporation, as well as how to get your business started here.