From the late Middle Ages to the present, the Corporation has been the preferred business entity selection for countless businesses.

The primary benefit of incorporating your business is asset protection. When you incorporate your business, you are limiting your liability to the money that you have invested in your corporation. Your personal assets can not be attached to fulfill the debts and obligations of your corporation - as long as you have respected the corporate form.

Piercing the Corporate Veil

The key to preserving the limited liability features of your corporation is called "respecting the corporate form." Simply put, you must respect all of the technical requirements that the law imposes upon corporations. This means holding director's meetings on a regular basis, and keeping all assets of the corporation separate and distinct from your personal assets.

Nothing causes a swifter loss of your corporation's limited liability than commingling personal and corporate funds. If you do this, and your corporation is sued, the Court is likely to "pierce the corporate veil." This means the court will disregard your corporate form and hold you personally liable for its debts and obligations. In essence, the Court is saying: "Since you have not treated your corporation as a separate and distinct entity, neither will we."

The Role of Legal Counsel

Using qualified legal counsel in the incorporation process of your business is invaluable. Not only will your attorney help you decide if the corporation is the right entity for your business, they will help you fulfill your legal requirements to ensure that you are "respecting the corporate form."

The newspapers are full of advertisements that say "Incorporate your business for only $99.00" In fact, filing the Articles of Incorporation is the easy part - it is only the beginning. Having your Articles of Incorporation on file with the Secretary of State is no guarantee that your corporation will fulfill the requirements of California Law. Working with informed legal counsel is one of the best ways to ensure your corporation meets the requirements imposed by law.

What Kind of Corporation is Right for Me?

There are three primary kinds of corporations: The standard "C" corporation, the "S" Corporation, and the Professional Corporation.