In the Start-Up Entrepreneur Series, I will be taking a deeper look into some of the most common questions early stage founders face in putting together and operating their new businesses.
This post is a continuation of our discussion on the differences between corporations and LLCs (if you missed Part I, check it out here). Note: As I did not want to split this discussion up over three weeks, this post is a bit longer than most.
How likely are you to follow “corporate formalities”?
One of the primary purposes of setting up a new business entity (rather than just operating as a “sole proprietorship” or similar “individual” form) is to protect yourself and your investors from liability for the actions of that entity. As I tell it when giving presentations on forming a business: you set up a corporation (or an LLC) to prevent someone from seizing your house if your company gets sued.