[MUSIC] By now I'm sure you've begun to realize that there are a lot of different considerations that go into creating a new business. And the hard part of it all is that every company is different, the same is true for how to incorporate a company. In this module, the goal is to highlight the importance of incorporation, and the considerations you must account for. My use of the term incorporate, it's specifically referring to the act of creating a new legal entity for the purpose of running your business. I do want to mention that we'll be exploring this topic from the perspective of a company founded in the United States. Due to the nuances of corporate law, this topic can vary greatly from country to country. So I apologize in advance if some of the material does not apply to your given location. With that being said, I believe that a lot of the topic matter will be applicable regardless of geography, so I hope you choose to follow along. Starting a legal entity is certainly not a necessity as you could decide to operate as a sole proprietor or basic partnership if you have more than one founder. But incorporation is now a standard practice in the United States and for good reason. First and most importantly is Liability protection. By creating a legal entity, the founder can separate their personal finances from that of the company. Therefore, in the instance of bankruptcy or lawsuit, the owner will not be personally liable. There are exceptions to this rule such as gross negligence or the commingling of funds. But for the most part, it's this reduction of liability that provides comfort for many to even think about starting their own business. Secondly, the incorporation process defines a percentage of ownership amongst equity holders. And thirdly, incorporating sets the stage for the ability to bring on additional owners if necessary. Every company has its own journey and often times it's not necessary to start a company when you're just talking about the pursuit of an idea with a friend. Therefore the logical point to incorporate in my opinion is when you transition from talk to taking action. Specifically when money is going to be spent. It's at this point that you want to make sure that your personal and business finances become separated to ensure liability protection. Additionally, these points become even more critical when there are additional founders to ensure that there is transparency in all ownership related matters. To be clear, there's little risk in acting too early other than you might spend money on attorneys and filing fees for an idea as opposed to an ongoing concern. So when money and ownership are of concern, it's time to incorporate. For the purpose of the module we will only be talking about the two most common types of entities in the United States, which are C- Corporations and limited liability corporations. It's not to say that the other forms of corporations don't have their place. They're just less commonly used by the average start up. In reality, this topic matter could become an entire course unto itself. So let's get started by looking at these two options. [MUSIC]
