rogerd - 2:07 pm on Feb 14, 2006 (gmt 0)

>>transferring the property of his website to this company to get rid of some of the legal responsibility;

This is a case where seeking some real legal and accounting advice would be an excellent idea. Determining the type of company to form, the tax implications of transferring the property, how site income will be handled, etc., require someone who knows what he/she is doing. Botching this could result in little or no additional protection and a lot more accounting, plus potential tax ramifications.

A corporation DOES provide some insulation for the individual. In most cases, a financial judgment against the corporation can't be forced onto its shareholder(s). If you get into areas like illegal acts, slander, etc., though, it isn't clear that the corporation will provide a perfect shield.

The site owner needs to think about exactly what kind of legal problems he is trying to avoid, and then consult an attorney in his jurisdiction to see if incorporating would provide the protection he wants, and what kind of corporation would be appropriate. (In the US, there are C, S, and LLC corporations, for example, all of which have very different tax implications).

I know that small businesses often can't afford to run to a lawyer every time they have a legal question, but this is one of those important ones that needs professional help. (Cost saving idea: one small-business attorney I use is also a CPA - he answers questions like this without having to say, "...but you really need to check with your accountant, too". I don't know how common this dual role is, but it's handy. Small business lawyers and CPAs, though, generally know enough about forming a tiny business to give advice without shuffling you off to another professional.)

<added>I was writing at the same time as Webwork was posting his excellent advice. Listen to what Webwork says...</added>