But if you have already toiled as a solo proprietor, is it too late to incorporate?

The answer is maybe, says Josh Hollingsworth, a partner with Barnes + Thornburg in Indianapolis. “It’s never too late, but on the other hand, it could be,” he says.

How can that be? Incorporating a business protects the owner’s personal assets from the moment the company is incorporated, but not for acts, frauds or other nefarious transactions that occurred prior to the incorporation. In a sole proprietorship, the owner is personally liable for any claims against the business.

In other words, “your own personal assets are at risk until you incorporate,” says Chambers.

What’s so great about going corporate?
Generally, the primary benefit of incorporating a business is that doing so limits the owner’s personal liability for the debts and obligations of the company, says Hollingsworth.

Three flavors of corporations are available to business owners seeking to protect their personal assets. They are:
• C Corp.
• S Corp.
• Limited Liability Company (LLC)

In a C Corp., two levels of taxation exist. When the corporation generates income, it pays tax on it and when a dividend is distributed to shareholders, they are taxed, too. More popular is the S Corp. because those entities enjoy a “flow through” provision, says Chambers. That means company profits flow directly to shareholders so income is not taxed at the corporate level.

However, both Chambers and Hollingsworth say the majority of companies they incorporate elect to become LLCs.

“An LLC is a good hybrid,” says Chambers. That’s because in an LLC, the corporate owner enjoys limited personal liability along with certain tax benefits. For example, profits can be distributed unevenly to members (known as shareholders in C and S Corps.) but with the other two corporate types, they must be doled out evenly.

Because the three types of corporations offer varying protections while imposing different restrictions on its owner, it’s best to consult with an attorney and accountant to determine which is most appropriate for your situation, says Chambers.

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Tami Kamin Meyer is an Ohio attorney and writer. She may be reached at This email address is being protected from spambots. You need JavaScript enabled to view it. or @girlwithapen.