Today, I'm going to answer the question: why form an LLC or corporation for your business? For most people, the answer is asset protection. If your company is a sole proprietorship or a general partnership, everyone is liable for all of the company's debts. If your company is sued or cannot pay its bills, all of your assets are then at risk. This includes your home, car, savings, and even your child's college education fund. In most states, the first thing that happens after you lose in court is the plaintiff's attorney will attach your bank account to pay the judgment. However, if your company is an LLC or corporation, the LLC or corporation is a legal entity considered by the law to be separate from you. Unless you agree in writing to be responsible for your company's obligations, the creditor cannot reach your personal assets. Therefore, most people form their company as a corporation or LLC to protect their personal assets.
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