In deciding whether to incorporate, there are basically two issues: tax and liability. A corporation is a separate legal entity. Accordingly, it is a taxpayer and it can incur debt and enter into contracts and other arrangements that may give rise to liability. The first step is to identify the nature of the new business, including the necessary financial investment, the expected revenues and cash flow, and all potential liability, as well as the availability and cost of insurance for such liability. If you do not incorporate, you could be personally responsible for any liability that arises in relation to the business. Accordingly, if there is a real risk that creditors, suppliers, or customers may bring a claim against the business, it would make sense to incorporate to ensure that liabilities are limited to the assets of the business.
On the other hand, if insurance is available for the business liabilities at a reasonable cost and there are tax advantages available to you personally during the initial stages of the business, you may decide to begin the business as a sole proprietorship or partnership and then incorporate a company and sell the business to the company at the appropriate time. We would be happy to review the various considerations and options available to you in making this important decision.