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Incorporating Your Business on the Cheap

Corporation Filing

Incorporating your Business on the Cheap

Incorporating your Business on the Cheap is something a lot of business owners think about doing themselves. The reason they want to incorporate on the Cheap is that they understand that there is financial risk by owning a business. Anyone can File a lawsuit these days, and you can only afford so much insurance. While we Love doing Taxes and other types of Returns, helping our clients STAY in Business is important too. That is why we wrote this article.

There are quite a few businesses to assist you in the process of incorporating your business, some as low as $99.But the question you should be asking is what the best way is to protect you.

First, let us talk about why Filing to Incorporate 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 Filed their own corporation documents. Maybe they used a web search to find a Service who would File the Corporate documents 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 Filed lawsuit in the mail for his business. The Filed lawsuit was for $ 500,000.  The owner had incorporated their business, so the thought process 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 at home a motion to pierce the corporate veil. What does that mean, you ask?  It means that if their attorney can prove that your corporation was incomplete, that you did not create or Filed the proper paperwork or you failed to operate your corporation in a proper manner, then the wall between you and the corporation can be broken and you could become personally responsible. If you think dealing with the IRS and Tax Preparation is costly…you have not seen anything until you start dealing with Attorneys.

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. If the attorney fails to defend the veil their errors and omission insurance should cover the cost of your lawsuit.

Our Opinion

I am going to tell you that Incorporating your Business on the Cheap is a huge mistake. I know, we do Taxes and should stay in our lane. 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. After all, we do Income Taxes, we are the Tax Preparation people and we are not attorneys.[/vc_column_text][/vc_column][/vc_row]