These days, almost any successful business or individual is vulnerable to our overly litigious society. If you are a small business owner, it may be time to plan the various ways to protect your assets from being decimated in the event of a false claim or malpractice suit. A few simple steps can help to save you from the devastating effects of bankruptcy.

Many will tell you that the best protection for a small business is to incorporate in an S Corporation. An S Corporation will enable an individual to establish a small business as a corporate entity and keep all business earnings separate from personal finances. Before jumping headfirst into an S Corporation, however, there are a few things to keep in mind.

First, it is important to truly understand how an S Corporation works. A little bit of research will reveal the basics. S Corporations have fewer rules surrounding the number of shareholders. Nevada, for instance, requires only one person to be the main shareholder or director; and, the director does not even have to be a resident of Nevada!

Advantages and Disadvantages with S Corporations
S Corporations, along with providing financial privacy, may also save certain individuals on taxes. The income from an S Corporation is all passed on to the shareholders. If the shareholders live in the state of Nevada, they will not pay any income tax. The disadvantage for the out of state shareholder, however, is that they must pay income tax on their dividends, according to their state tax law.