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You don’t have to incorporate, but you could lose everything you worked so hard for.

Just to preface, I’m currently helping 100’s of startups get incorporated with LawTrades.

Alright, now that we have the credibility out of the way, let’s dig in.

Businesses incorporate for a reason and one such reason is to limit personal liability. If you startup as a sole proprietorship and your business gets sued, your personal assets can be at risk. On the other hand, if your business is incorporated then only the corporation can be held liable.

While a corporation may have a few more record keeping requirements and such, this is a relatively minor drawback to endure for the liability protection that it offers.

A few additional benefits of incorporating are that a corporation offers unlimited life (the corporation will not dissolve upon the death of an owner), ownership shares can be easily transferred, and incorporation is often a requirement when raising capital. In fact, if you ever reach such a point, many VC firms prohibit funding unless the company is a corporation.

Before you incorporate, you should learn the differences between a C-Corporation, an S-Corporation., and an LLC. A wrote a brief answer on some of the differences here: Should a tech startup incorporate as an LLC, a C-Corp, or an S-Corp? If so, why?

Remember, it may be tempting to skip all the “boring” tasks as a founder especially if the business is bootstrapping. However, such tasks will pay dividends to you later on down the road if something unfortunate should occur.

Good luck!

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