Liability as A Consideration when Forming a New Business
June 12, 2020
It is a dream that many South Carolina residents have had at one time or another – leaving the corporate world and starting their own business. A start-up business can be a rewarding endeavor for an individual who is prepared to make hard sacrifices and important decisions about how to further the interests of their fledgling entity. One the first and most critical choices that a business owner must make is how to establish the legal structure of their organization.
Depending upon the number of individuals who plan to start a business and the goals of the entity, a new business can take on a variety of different structures. For example, a sole proprietorship is an entity owned by one person, whereas a partnership is a business owned by at least two parties. Corporations are more complex structures, and they offer a significant advantage over some others: insulation from liability.
When an individual sets up a business as a sole proprietorship, their business exists as an extension of them. It is not a separate entity for legal purposes, and to that end the owner of the sole proprietorship is responsible and legally liable for the actions of the business. If the business is sued, the personal assets of the business owner may be pursued by the allegedly wronged party.
A corporation, on the other hand, is its own legal entity. If it is sued, its owner is not personally liable for any losses that is alleged to have caused. This post does not offer legal advice and readers are asked to consult with their business law attorneys for guidance on how to structure their own start-ups.
Beginning a new business can be exciting but there are a lot of important decisions that a person must make to protect themselves and their new entity. Legal support from the start can be an incredible asset for a new business owner that wants to see their start-up succeed.