A: Assuming the small business is a sole proprietorship, or that you own real estate that you rent out, a good step toward protecting your personal assets from business related lawsuits is to incorporate or use a Limited Liability Company (LLC). In most cases, an LLC is much better for rental property than a corporation. If you use a corporation, be aware that simply incorporating your small business is not enough. Strict adherence to corporate formalities and proper capitalization of the corporation are necessary. If you use an LLC, there are fewer formal requirements, and you have more flexibilty in structuring the entity.
Q: I am currently in a business partnership with other people, and I am concerned about my personal liability for the acts of my partners. Is there a way I can limit my liability?
A: You and your partners should consider reorganizing your business as a Limited Liability Company (LCC). An LLC gives corporate like protection to its members, but for tax purposes, the LLC will be as a partnership. The LLC offers the best of two worlds - the limited liability of a corporation and the flexibility of a partnership for determining profit and loss shares.