Today, I wanted to share some important information with you regarding your business and protecting yourself personally against your business’s liabilities. This article relates to all type of businesses not just those in the construction industry. Because we represent businesses, a great deal of our work involves ensuring our clients have maximum personal liability and asset protection.
As we all know, people have become increasingly litigious in our struggling economy. Anytime we are in a struggling economy, I see more people being sued personally, meaning they are not adequately protected from the personal liability associated with their business. One 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.
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 to ‘start your company’; I’m especially talking to you. 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 business with sole ownership, does not 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 your personal assets and property as well. Additionally, you can personally be liable for your business’s debts.
Do you fall under one of these two 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?
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!
