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Regardless of the type of business you conduct, there is asignificant risk of being sued in our litigious society.Lawsuits can range from claims of negligence to defectiveproducts to disputes with employees. Incorporating is ameans of guarding against these potential threats.

Single Incorporation - Protecting Your Personal Assets

Incorporating your business is a method for creating a legalwall between your personal assets and business. Any judgmentagainst your business will not impact your personal assets.While your home, savings, stocks, etc., are protected, whathappens to your business? If a judgment is rendered againstyour business, the business assets are as good as gone. Thisdoesn't have to be the case.

Double Incorporation Strategy - Protect Your Business Assets

Many businesses can benefit from pursuing a doubleincorporation strategy. The strategy is designed to addressthe situation where a business has significant assets thatare exposed to litigation risk. If you incorporate yourbusiness, it is all well and good that your personal assetsare not at risk. But what if your business has a number ofhigh value assets such as manufacturing machinery, officeequipment, popular domain name, custom software or otheritems? Merely incorporating your business will not protectthese assets because they are owned by the business entity.Since a successful lawsuit would result in a judgmentagainst the business entity, all assets of the businesscould be seized as part of the judgment. In short, you loseyour machinery, office equipment, intellectual property orany other item of tangible value. The double incorporationstrategy prevents this scenario.

As the name suggests, the double incorporation strategyinvolves the creation of two business entities. The first isyour "at risk" business that interacts with your customersor clients. The second entity, a "holding corporation", isthen created to own the valuable assets of your business.This holding corporation then leases the relevant businessassets to your "at risk" entity. If the "at risk" entity issued, the holding company merely recovers its assets and theplaintiff is forced to settle for pennies on the dollarbecause the "at risk" entity has few assets. In essence, theplaintiff wins the battle, but loses the war.

Most people know that a business entity can be used tocreate a protective shield for their personal assets. Ifyour business has high value assets, now you can use thisdouble incorporation strategy to protect those assets aswell.