BUSINESS CONSULTING AND COMMERCIAL LITIGATION
We handle many types of Business Disputes and Commercial Matters including:
- Contract Preparation and Enforcement;
- Commercial Collections Disputes;
- Labor and Employment Matters;
- Confidentiality, Non-Disclosure and Non-Competition Agreements;
- General Business Strategy and Advice.
THE CORPORATE VEIL – PROTECTING SMALL BUSINESS OWNERS FROM PERSONAL LIABILITY By Gregg Paley, Esq.
One of the many smart reasons to incorporate your company is protecting the owners from personal liability for business transactions. Just in case the business plan doesn’t work out, there’s no reason to risk your home and savings account to pay off corporate debt.
By creating the right protective umbrella or “corporate veil” around your assets, it’s nearly impossible for business creditors to hold you or your partners personally responsible for anything the company does. However, you’re not protected against valid fraud allegations so do things right and you’ll have no worries.
Although the laws vary slightly between states, the general rule is that owners, partners and shareholders won’t be held personally responsible for company debt without clear and convincing proof of fraud or other illegal conduct. And we’re not talking run of the mill fraud fun as most states require evidence that the company itself was organized to defraud creditors. This is much harder to prove and why the corporate veil is so effective for business owners.
So how is this magical umbrella created? Tap your heels together and repeat “there’s no place like home” … if that doesn’t work start with the following suggestions and call me if there’s more questions. The first step is choosing the right corporate entity and deciding whether a partnership, corporation or LLC is best for the business. Once the company is set up, you’ll need a business bank account for all company activities and make sure not to comingle business and personal assets. For example, never use personal checks or credit cards to pay business expenses or business funds to pay personal debts.
There’s a lot more involved in properly setting up and running your company to avoid personal exposure such as meeting all “corporate formalities” by making sure your books and records are up to date and complying with the state and federal requirements for your business. For more information contact Gregg Paley at Colson & Paley, LLC.