Unfortunately, I have noticed in my practice that most of our new clients are not adequately protected from the personal liability associated with their business as they thought. A couple of the most common misconceptions I hear from business owners is that once a Corporation, LLC or other legal entity is formed, the owners are protected from personal liability or that they spent $150 on www.thecheapestllc.com plus the state fee and then magically they are like Teflon.
If your company is already set up as a legal entity, you have taken the first step to protect yourself and your assets personally in the event of a lawsuit. However, many business owners believe that forming a Corporation or LLC guarantees protection from that point forward, if you only spent $150 online I’m still talking to you too. On the contrary, maintaining your company as a separate entity, including exercising proper formalities, such as regular corporate meetings with corresponding minutes, is essential to personal liability protection.
Another common misconception I hear from business owners is that a small business, or a businesses with sole ownership, doesn’t need a corporate entity. All businesses, regardless of size, have the potential for legal liability. It may be through contracts with customers or vendors, or being accused of a wrongful act. Regardless of the size of the business, defending against a lawsuit can create hardship on the company. However, it can be devastating for the owners personally if there is not proper liability protection, because the person suing you can go after not only your business and its assets, but you personal assets and property as well. Additionally, you can personally be liable for your business’s debts.
Do you fall under one of these scenarios? Do you have a corporation but don’t know what a corporate book is? Don’t know what corporate minutes are? Know about them but haven’t done them for 10 years? Or have you never registered your company as a formal Inc or LLC with the Texas Secretary of State? Perhaps you ordered your corporation online and they sent you some documents or a corporate book to fill out but you either didn’t do it or don’t know if you filled it out properly.
Surely you would agree that it is not wise to not have health insurance or automobile insurance, right? Then why would you own a company in which the liability of owning the company could devastate your family for countless years simply because you failed to understand and follow simple guidelines to protect your business. Don’t let this happen to you!
Here is a document that contains some of the reasons that you could Lose Corporate Protection