Business Insurance Liability is a fact of life in American business, and it is often claimed that litigation has become a method of competition in the marketplace. See Internet-Related Legal Resources for examples of the trials and tribulations of even having a domain name for the World Wide Web. Although having a corporation may insulate you personally from being the defendant in a lawsuit, if the defendant is your sole source of income, there is no practical difference. All your time and all the company's money is sucked up into the lawsuit. If you have good business insurance, at least you can have your insurance company paying your lawyer's bills, even if you still have to spend too much time on the litigation.
Taxes There are several issues involved in taxes.
First, it may not be to the best advantage to form a corporation right away. Many months of losses generally precede the turn around and profits. Losses in a C corporation may be lost forever if the company never turns around to generate profits. It may be that the individual owner could have used the losses to offset the income earned by a spouse. In California, corporations owe hundreds of dollars in state taxes their very first year.