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WHY OR WHY NOT TO BE A CORPORATION? THAT IS THE QUESTION.
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There are many reasons why a business would find it necessary or advantageous to be a corporation. Some these advantages are limited liability, insurance, financial, and tax reasons.

Any good attorney will tell their business clients about limited liability. There are a number of ways a business may be held liable for its actions. The two main areas of law are contract and tort. For small businesses the owner and the business are so intertwined the lines are so muddy that it is hard to tell where the business starts and the owner ends.

Attorneys will say that a corporation can help shield liability under contract law; especially if the contract is signed by a corporate officer as a corporate officer. Tort law is somewhat less shielded; hence this is where business insurance comes to play. It is my contention that a business even in a low liability business should incorporate for this reason alone for the following reasons. One is for the fact that most people will assume that they can not sue a corporation and collect their judgement. Since corporations are so easy to form and to dissolve, along with very liberal bankruptcy laws the conventional wisdom will prevent most people from suing a corporation and the corporate officer. Secondly even if they do attempt to sue they must hire a qualified attorney who knows that they can sue the corporation and the corporate officer. Finally one would have to be able to afford an attorney to jump this extra hurdle and only collect if the attorney wins; and this is a big if. In any case, businesses need business insurance anyway, better safe than sorry.


1) Instructions the business gives the worker. An employee is generally subject to the business' instructions about when, where, and how to work. Even if no instructions are given, sufficient behavioral control may exist if the employer has the right to control how the work results are achieved. Reg. Section 31.3401 ( c ) - 1 (b). (The employer does not instruct the captain nor does the captain look to the owner for instruction.

2) Training the business gives the worker. An employee may be trained to perform services in a particular manner. Independent contractors ordinarily use their own methods. The owner does not train the captain.

Another advantage of incorporating is for insurance reasons. I often point out to my clients the following question before they are incorporated. I understand if your car is in accident your insurance company will reimburse you, I understand if you get hurt, your medical coverage will pay the doctor and hospital, but how do you get paid if the business owner gets hurt and can not work. As a corporation the corporate owner officer can qualify to be eligible for workers' compensation. The officer can elect out of coverage, but it is an option that otherwise s/he did not have before. In fact my father incorporated for this very reason. He had a heart attack at a very young age and could not get cost effective medical and disability coverage, workers compensation was a good alternative for him. For most I suggest a good disability program, either disability overhead insurance or disability income coverage. Disability overhead insurance will pay typically for the general expenses of the business; Disability income will pay 2/3 of the pay of the corporate officer. Disability overhead insurance is normally a lot less expensive.

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