One of the key issues you would face is legal liability.
So let's image that one day this didn't work for some reason and
somebody cut off their finger.
Under a sole proprietorship the person who suffered those damages could sue you and
could sue you personally perhaps taking everything you have.
And so one critical purpose for creating a separate legal entity is to limit
the liability of the entity to the entity itself rather than to you personally.
The second issue around SawStop is that it might
need have some outside investment in order to grow and to become successful.
In fact it did have outside investment.
Almost always outside investors will require
that your business is separate legal entity.
Because they want to know what they have an ownership interest in and
the whole legal system around new business, around forming new entities
was established in part so that you could allocate the profit interest.
Or the value of the business, the equity, to others including investors.
A third reason for doing something other than a sole proprietorship is
that you often want to create incentives for your managers and employees.
And so you want to allocate to them profit interests or sharers in the company.
And to do that you really need the machinery of sharers and
of a new legal entity.
So those are the primary motives for
forming a new legal entity in entrepreneurship.
Now I want to be very clear that the law around new business
varies widely according to your jurisdiction, according to your geography.
By country and even by state within country.
And so you really have to consult with a lawyer and I can't emphasize that enough.
You can't do this yourself.
You really have to consult with a lawyer in order to get this right
based on the details of your location and jurisdiction.
Let me give you a sense of what that involves.
A relatively simple incorporation of a new business that's
owned solely by the founder and without any outside investment will probably incur
about $1,000 to $5,000 in legal fees in order to establish the new venture.
That's probably what you can expect to spend.
If you need to raise capital from an outside investor,
that typically requires significant additional legal expense.
It's often between $10,000 and $50,000 in legal fees with venture financing,
where you have an institutional investor who will demand
a lot of legal assurances in association with that investment.