The shaky economy and mass corporate layoffs of the past several years have led thousands of Americans to start their own businesses. If you are a business owner and have structured your business as a corporation or a limited liability company (LLC), there are certain legal formalities you must follow or you risk opening yourself to personal liability if a lawsuit is ever filed against your company.
One of the main reasons to incorporate or form an LLC is to protect personal assets; if your corporation or LLC does not observe the legal formalities that rule the governance of your company, you muddy the legal waters between personal and business assets.
A Creative Business Lawyer® can assist business owners with the right corporate structure for their business and ensure you are following the legal requirements for each, including executing a Corporate Shareholder or LLC Operating Agreement, keeping meticulous records on corporate meetings, drafting by-laws and resolutions, and more.
When a corporation or LLC is not managed under the proper formalities, a court may find business owners in breach of their fiduciary duties since the court would be unable to ascertain if the corporation or LLC is truly separate from the owner and his or her personal assets. If a court finds that the business is not separate – known as “piercing the Corporate Veil” – the business owner will not be protected from liability or creditors of the company. In that case, a business owner’s personal and business assets could be seized in a lawsuit.
The best way for business owners to protect personal assets is to consult with a Creative Business Lawyer® to assist with the development of the appropriate documents and by observing the correct corporate formalities for your business.
The Parents Estate Planning Law Firm, PC
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