Why is it important whether the builder/contractor is incorporated?

I was so pleased to read the question listed above as comment on a recent blog post. Please continue with questions, and I will be happy to answer them. There are a number of reasons to want to know whether a builder/contractor is incorporated.

In general, the reason to incorporate a business is to protect one's individual assets from creditors. For that reason, and others, many businesses incorporate. A corporation is like a separate individual. So, if you obtain a judgment against a corporation, you can only collect against corporate assets. Sometimes contracting companies own trucks or equipment, but in general, they do not own valuable assets. So, before investing money in a claim or lawsuit, it is important to figure out if there is anything to collect against at the end of the day.

Of course there are other reasons to incorporate as well. There are tax implications, branding and marketing reasons (to protect a particularly catchy name), and other financial and business reasons.

In Massachusetts, a designee of the corporation is jointly and severally liable for a violation of the Home Improvement Contractor Statute. That means that the designated individual can be held individually liable for a violation. It is important for contractors to know this and make sure to follow the law before they start going after homeowners for money, etc. Contractors do not want to be held invidually liable under the law and subject their assets to seizure!