Incorporating Your Business on the Cheap

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Incorporating your Business on the cheap

Incorporating your Business on the cheap is something a lot of business owners want to do. The reason they want to incorporate on the cheap is that they understand that there are financial risk by owning a business. There are quite a few businesses to assist you in the process of incorporating your business, some as low as $49.

First, let us talk about WHY Incorporating your Business on the cheap is an idea. 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. Secondly, everyone wants to save as much money as they can especially when you are starting a business.

Real  or imagined protection?

Let us talk about a business whose owner that Incorporated your Business on the cheap is it worth it for $49 plus the state filing fees. The Owner incorporated because they knew that they did not want the personal liability. They got the state corporation certificate, got the federal ID number and continued on with the business. What a deal!

Six years later, the owner received a lawsuit in the mail for his business. The lawsuit was for $400,000.  The owner was incorporated their business, so reasoning was that the owner did not have to worry about losing their 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.

The long term cost

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 $1500), the attorney 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 for free. He the attorney fails to defend the veil their errors and omission insurance should cover the cost.

Our Opinion

I am going to tell you that Incorporating your Business on the cheap is 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 $1400 more to do it right.  Where else can you spend $1400 and get a lifetime of insurance protecting you from a potential lawsuit?  What good is Incorporating your Business on the cheap 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 about Incorporating your Business on the cheap 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.