Every day I hear the radio ads to INCORPORATE NOW!!
A couple of associates of mine who are fairly well off seem to operate all of their personal finances through a corporation that is obviously just a front of some kind. I have no idea how this works.
Under what circumstances would someone be advised to do all their personal business as a corporation? Is it just for the very wealthy? Pros? Cons?
It is not just for the very wealthy, I have several friends of moderate means who are incorporated. I think the advantages and disadvantages are very dependent on your financial status and goals, and are frankly much better discussed with a professional than one-size-fits-all answers you might get here.
My mother sells Nevada corporations, and it’s a bit sleazy but interesting.
Basically, the purpose behind incorporating is to be able to protect as much of your stuff as possible. So, you basically create another entity which then “owns” your house, car, business, etc. That way, if you’re sued, you can’t lose anything “owned” by the corporation. Mom targets businessmen with high-dollar inventory, doctors and other professionals, and generally people with a lot to lose if they’re sued. Nevada is the preferred state because they have secrecy laws that make it much harder to “pierce the corporate veil” and get corporate information.
I will admit that it is attractive if you’re in a position to be sued, and you’ve got a lot to protect. The sleaze comes in because it’s possible to use a corporation to get out of child and spousal support. (Mom won’t sell to anyone who expresses interest in these areas.)
It also used to be possible to incorporate in the Bahamas, for tax purposes. However, the feds do not approve of this move, at least not as a tax dodge.
Robin