Q: I just started my business, and I don't have a lot of money to spend on legal fees. Do you think I should incorporate my business now or wait until I've got some cash coming in the door?

A: While there's no law that requires you to incorporate your business, holding off on incorporating can be a risky bet. That's especially true if you own a home, a stock portfolio or other valuable assets. Doing business without a corporate shield to protect you can leave you exposed you to claims from customers, employers and creditors.

While the risks may seem small when you start, they grow bigger the more business you do. "When you own and operate your business through a corporation or limited liability company, you generally will not have personal liability for the company's obligations," says Meryl Unger, a corporate and securities lawyer (who works with entrepreneurs and fast-growing companies) at New York's Katsky Korins LLP. "The assets of your company are at risk for the company's obligations, but your personal assets are generally protected." This protection applies not only to loans or other contractual liabilities but also to damages from lawsuits, she says.

You'll have more credibility with banks and corporate customers. Plus you'll be able to transfer the equity in your business if you decide to sell the business or pass it on to your kids.

The downside to incorporating is the fees and paperwork that go with it. In addition to the money you'll pay your lawyer, you may also have to pay an initial filing fee (typically several hundred dollars, depending on the state), annual filing fees and publication fees to advertise your company's formation.

Though there are dozens of do-it-yourself incorporation websites that can save you money on legal fees, it's a good idea to hire a lawyer to help you figure out the best corporate structure for your business (C corp, S corp or LLC) and help you create your organizational documents. "Making simple mistakes or uninformed choices at this stage can often become extremely costly to undo later on," Unger says.