Judgments Against a Person vs. Judgments Against a Corporation: Small Business Laws

In terms of small business laws, although the most simple of small business structures, sole proprietorship have a downside: as a sole proprietor, you are personally liable for all business matters. In the case of an adverse legal judgment against the business, you personally assets could be wiped out. If your small business currently operates as a sole proprietorship, incorporating may be a good idea. Incorporating protects small business owners from personal liability of any judgments against the business. As members of a corporation, business owners enjoy limited liability, which means they are personally protected by small business laws from any liability of the business as well as any adverse judgments.

If your samll business entails giving your clients advice, publishing articles written by others, manufacturing products, or engages in any other kind of business that might get you entangled in a lawsuit, you should definitely consider incorporating your business. As a side note, if your small business is threatened with a lawsuit, check with your insurance agent to see if the dispute or lawsuit may be covered by your business insurance policy. Rather than just assuming that a dispute or lawsuit is not covered, it's a great idea to check with your business insurance agent. If the dispute or lawsuit is covered by insurance, then typically the insurance company is required to pay for the legal fees in defending the lawsuit as well as any judgment or settlement that is within the policy limits. Please contact us for more information about small business laws and judgments.