Legal Question in Business Law in North Carolina

IncorporationO

When opening a small business in North Carolina, is it necessary to be Incorporated, in order to be protected from a possible law suit. We, as parents are concerned about our daughter and son-in-law who are in the process of opening such a business (dealing with the public). We feel that they have received the wrong information from an attorney that they contacted regarding this. They were told that it was not necessary to incorporate. Is this true?? Thank you in advance for your response.


Asked on 5/06/02, 10:34 am

1 Answer from Attorneys
Randall A. Lenz Randall A. Lenz, Atty, CPA

Re: Incorporation

Incorporation or organization as a Limited Liability Company (LLC) is the most cost effective way of limiting personal liability to potential creditors in the context of conducting a trade or business. Obviously, the business and its owners can also purchase insurance to cover many types of risks of loss. Usually, a business will do both. There are also some very real tax advantages to incorporating, particularly with the S-Corporation which I recommend for most start-up operating businesses. I usually recommend the LLC for investment and rental activities. Without knowing more about your children's particular circumstances, it is difficult to say why the attorney would not recommend it. (Sometimes, if the level of business activity is very small, the initial and annual costs for incorporating may not be worth it).

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Answered on 5/06/02, 1:02 pm


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