What The Great Recession Told Us About Business Entities

If you are going to own a business, you really need to start a business entity to protect yourself. This is the basic theme you will here from lawyers time and again. Much like the boy who cried wolf, the statement has been heard and read so many times that many people started to become numb to it. The Great Recession, however, showed everyone why business entities are important.

The first part of this decade was a great time in America from a financial perspective. The economy was humming along and people were making bundles of money in real estate. Well, we know how that all turned out. The housing and mortgage markets collapsed and nearly took the economy with it. We are supposedly in a recovery now, but we are still seeing double digit real unemployment, massive foreclosure rates and a national debt level that is simply staggering with debt and unfunded liabilities equating to more than 60 trillion dollars! My, how things have changed.

One of the big wake up calls occurred in the business environment. As you know, two of the big three automakers went belly up, although they were able to survive with the help of the government. Less publicized is the fact millions of smaller businesses have also had to close their doors as the retraction of the economy simply put an end to demand. It was in this brutal scenario that the reason business entities are important became completely clear.

The bankruptcy of a business is not a pretty thing. If that business is run through either a corporation or limited liability company, however, the owners can usually walk away with a minimum of fuss. If there is no business entity, such as in a sole proprietorship or partnership, the owners are fully liable for the debts of the business. In most cases, this means they must file bankruptcy. Given this, you can see how beneficial it is to form a business entity to protect yourself from the debts of the business.

The Great Recession has been a brutal time in our history. Many people have learned hard lessons. If you are starting or running a business, make sure you take head and form a business entity to protect yourself if things go bad.

By: Tom Ajava

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Thomas Ajava writes about the advantages of corporations and other business entity and corporation issues for AdvantagesDisadvantagesofCorporations.com.