Incorporating Your Business on the Cheap


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There are quite a few businesses to assist you in the process of incorporating your own business, some as low as $49.

First, let us talk about WHY you incorporate your business. Most people incorporate to reduce potential future legal liability. Owners want to protect themselves, their family and their personal wealth from catastrophic events that they may not have any control over.   

Let us talk about a business whose owner incorporated his business for $49 plus the state filing fees. He incorporated because he knew that he did not want the personal liability. He got his state corporation certificate, got his federal ID number and continued on with his business. What a deal!    

Six years later, the owner received a lawsuit in the mail for his business. The lawsuit was for $400,000.  He was incorporated, so he thought that he did not have to worry about losing his home and future income.

The owner went to the first court hearing and the other attorney filed a motion to pierce the corporate veil. What does that mean, you ask.  It means that if the attorney can prove that your corporation was incomplete, that you did not create or file the proper paper work or you failed to operate your corporation in a proper manner that the wall between you and the corporation can be broken and you could become personally responsible.

Now the owner will have to hire an attorney to protect the corporate veil.  The cost is $8000-$10,000 or more. If the attorney does not protect the veil and loses the lawsuit, everything you own and your future earnings until they are paid can be taken from you. This estimated cost is only to protect the corporate veil, not to defend you in the lawsuit.  That will cost extra.  

If you hire an attorney to set up your corporation ($1,000 to $1400), he must protect the veil at his own cost. He does not have to defend the lawsuit, without getting paid, but he must protect the veil. 

I am going to tell you that if you incorporate your own business, you are making a huge mistake. Do not get me wrong.  I am all for saving money, but there is a line when cheap becomes stupid.  So, I ask you, is getting your corporation started for $49 a deal or a ticking time bomb? Let us say it is $1200 more to do it right.  Where else can you spend $1200 and get a lifetime of insurance protecting you from a potential lawsuit?  What good is setting up your corporation for $49 if you are not protected?

This information is provided for you for educational purposes only, as well as to give you general information and a general understanding of the law, not to provide specific legal advice.  The information should not be used as a substitute for competent legal advice from a licensed professional attorney in your state. The use of our information should be based on your own due diligence and you agree that we are not liable for your use of this information.