The Skinny on Incorporating
March 30th, 2006 by Grant in: BusinessI’ve read on a few blogs about people thinking of starting their own business, but in limbo about how to do it and which type of corporation to form.
I’ll explain why and how I did it with an oil company I started last year.
First of all, you need to understand why you need to incorporate. It’s all about asset protection. The idea is that you want to protect your personal assets by isolating your risk. You place your risk in a business entity to isolate it from your personal assets (i.e. your personal checking and savings account, your own home, etc.).
I bought an interest in some oil production in Oklahoma, and realized that there could be some risk associated with owning this interest and that it would be best to put this asset in a corporation of some kind.
To keep it short, I chose to form an LLC, and transfer the interest into the LLC. That way, if there were ever a lawsuit filled stemming from the oil interest, my personal assets would not be at risk in the suit.
There are other types of entities I could have chosen to form, and I’ll get into those in later entries in this blog, but this post sums up the reason to incorporate.
If you have any assets that could be at risk of generating a lawsuit, I strongly suggest you consider incorporating.
As always, feel free to send me email if you have questions about incorporating, and I’ll post more about my incorporation experience.
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