Structuring and proper operation of entities can be the key to shielding yourself from personal liability. While a single entity may not be able to accomplish all of your financial planning, asset protection, and tax mitigation goals, a combination of entities will most often provide satisfactory results.

Entities allow you to legally receive tax benefits and reduce personal liability in several ways.

•  Legal entities provide a “corporate veil”, which limits the liability of the shareholder(s)/member(s) to the amount of money invested in the entity. This means that your personal assets such as homes, cars, and savings are protected.

•  The entity titles, “Inc”, “LLC” or “Corp” communicate credibility and permanence to your customers or business associates.

•  Entities offer tax advantages in the form of deductions and benefit programs allowed for employees, officers, and directors.

•  Investors are usually much more willing to invest in Corporations or LLCs than in Sole Proprietorships.

•  Corporations and LLCs are enduring structures that can surpass the founder. A Sole Proprietorship generally dies with its owner.

•  Ease of transfer of ownership also makes entities desirable. The sale of an entity simply requires that its shares or membership interest be transferred to the new owner, thus avoiding the complex legal documentation and disruption of operations associated with the sale of a Sole Proprietorship, which usually consists of selling each individual asset separately.