Corporation vs. Liability

[watts10299]

What is the name of your state? MN

How cut and dry is it, if a Corporation is formed and the Corporation get's sued, how that could effect my personal life?

Scenario: There are 3 of us looking at starting a biz building kit cars and selling them. We have been researching the insurance and liability issues and one of the comments we read were in regards to starting a Corporation to protect our personal assets.

So let's say we start a Corporation, then start building and selling the kit cars. If someone were to sue, they would sue the Corp, correct? And if that were too happen, we would have insurance, which hopefully would cover everything.

But if not...my assumption is the most we would lose is...the business, correct?

Hopefully, it would not come to this, but you never know this day and age and we are only trying to protect ourselves.

Thanks for any info.
Jeff

 

[divgradcurl]

So let's say we start a Corporation, then start building and selling the kit cars. If someone were to sue, they would sue the Corp, correct? And if that were too happen, we would have insurance, which hopefully would cover everything.

In general, that's true -- but its not always true. For one thing, forming a corporation will only protect you if you really act like a corporation -- you have a board of directors, board meetings, all of the formalities of a real corporation -- including double taxation (you pay taxes on profits when the corporation receives them, then again on income when the profits are distributed to you guys). If you don't follow all of the corporate formalities, then the corporation may not protect you, or may protect you incompletely.

There are other business forms that can be used to limit your liability in certain cases. You should talk with a lawyer to determine how best to limit your liability in your specific state.

 

[spawn_x]

And this is a completely wrong forum to ask the question in.