| Actually, the answers to this depend very much on where you live. Many cities have zoning laws and many subdivision have deed restrictions that may require you to pay additional fees or place certain limitations on your business if the office is at your house. You need to check with both the city and homeowner's association (or your deed, if you own your home).
One thing you may want to consider as an alternative is using a private mailbox. This has a number of advantages over using your home address.
As far as incorporation, a lot of people incorporate for the wrong reasons. They get told that it protects you from liability. Liability for WHAT???
Basically, there are two kinds of liability that typically occur: civil liability for negligence, breach of contract, etc., and debt.
Let's look at each of these:
Civil liability -- If you actually did something criminally negligent, you're going to be personally liable anyway, even if you were acting on behalf of the company. And in many cases, it's possible to "pierce the corporate veil" and go after the owners of the company as well. But most importantly... you NEED general business liability insurance. And if you HAVE it, and you're not doing anything outrageously risky, then it should cover you, and you don't need a corporation to protect your assets.
Of course, if you're doing high-risk business, or dealing in large dollar amounts, then it's more of an issue. But I know that in my case, it's never been an issue.
Debt -- If you're not taking on debt, then you don't need a corporate structure to protect your assets from creditors, now do you? And even if you have a corporation, when you first start out, odds are that you (or someone) will have to personal co-sign as a guarantor on any loans anyway -- new businesses can't get credit on their own. And guess what -- if you have employees, you're going to be responsible for making their payroll, even if the corporation goes bankrupt.
Of course, if you have a situation in which your debt is to the IRS, then you definitely want to have that corporate structure there! ;-)
Another reason people incorporate is credibility.
Please.
File a DBA / fictitious business name and put that on your business cards and everything else. People don't really care if there's an Inc. or an LLC afterwards. Your company name is your brand. It's not "Royal Dutch Shell PLC", it's just "Shell". I keep seeing various articles saying this, but I think it's a complete myth.
I'm not saying that there aren't ample reasons to form an LLC or incorporate (see Business Legal Organizational Structures) -- I'm just saying that a lot of one-person businesses incorporate because some expert has told them they should, when in reality there are other ways they could address those issues. And incorporating means taking on a bunch of additional expenses, even as an S-corp. You're going to have franchise taxes and other annual filings, the corporate book to maintain, and so on.
If you don't incorporate, you obviously don't need a corporate secretary. Most LLCs don't have one either.
Of course, you should consult with an attorney and an accountant about your particular case -- I'm speaking in generalities. But just don't make the assumption that you have to incorporate. It may be the right decision in your case, but make sure you've considered the alternatives. For every advantage of incorporating, figure out how you would handle it if you stayed a sole proprietor.
Scott Allen
About.com Entrepreneurs Guide
Ryze Entrepreneurs Network Leader Private Reply to Scott Allen (new win) |
