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Welcome to another edition of Tuesday Tidbits, where we make tax and accounting
simple. I'm your host Charles D. Shapero, CPA
with Widget Bookkeeping and Tax, and today we're gonna talk about why
you might want to form an entity. A lot of people when they start their own business
they do a little thing on the side. And that little thing grows and grows
and pretty soon it's big enough where the question arises, maybe I should form an entity.
Should I have an LLC or an S-Corp? And why would I want to do that? Well the single biggest reason
that you might want to form an entity is liability protection.
WIth business, comes risk, your clients could actually sue you
for something. I'll give you an extreme example:
Let's just say that your business is renting houses,
you own those houses in your personal name, god forbid you invest in a house that has a pool
or is upstairs, because if
somebody falls down those stairs or somebody drowns in that pool
that could be a multi million dollar lawsuit and if you
don't have that property in an LLC
they can take everything you own. So it's a serious issue
In that instance we probably want to have the LLC own that rental propery.
In that situation if you have that multi-million dollar event. They'll be able to collect on your
homeowner's insurance that you have on that property and then once
they eat up all the assets that are sitting in the LLC, they can't come
get your personal house, your personal car, your boats, that kind of
that is protected. That's the single biggest reason you'd want to
have an entity. And that concludes today's tidbit.
See you next Tuesday!
Widget Bookkeeping and Tax, Know more, keep more.