The Tale of Two Businesses

I tell this story to new businesses that are wondering whether incorporating or forming an LLC is for them. It’s just an example, really, but it’s a farily common scenario, unfortunately. It helps put into perspective the risk of running a business and how important asset protection really is.

At the start of 2006, two businesses were started. Both companies opened a car wash. Both companies had 2 employees, rented space and had a marketing plan. After 1 year only one company was still in business. Why?

When Doug started Clean Wash, Inc., he incorporated his business. He wanted to make sure he protected his personal assets, and be able to take advantage of some additional tax savings. Two years later, Doug has two locations and a big contract to wash all the emergency vehicles for his county. Putting the Inc. behind his name gave him the liability protection and credibility he needed to be successful.

When Fred started Complete Detail, he decided to operate as a sole proprietorship. He looked into incorporating but decided to wait, because he was too busy landing a big contract with a luxury car dealer. Everything was going well until one day, he was washing a fleet of luxury cars and noticed the machines had scratched 15 vehicles. He offered to repaint the cars but that didn’t satisfy the dealer and he ended up in litigation. It cost him everything, he lost his business and most of his personal assets, to satisfy the judgment.

Forming a corporation or limited liability company isn’t for everybody, but if you have clients, rent space, have employees, own property, own a house, have inventory, or have assets then a 5 minute phone call to us is definitely worth it. You can also contact us online if you prefer. Just ask to speak with a consultant in the comments field!