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Do you have a corporate shield to protect you and your business?

September 18, 2012 by · Leave a Comment 

Small business owners have very little time to devote to formalities such as maintaining financial records. Therefore, many elect to run their business as a sole proprietorship or as a general partnership. These forms of businesses require less attention to formalities and allow the owner to concentrate more on the business side. However, these forms of running a business do not provide the owner with the protection that is needed to run a business. The owners will be personally liable for the debt and expenses of the business.

If you are seeking to limit your personal liability for debt and expenses of the business, look into a LLC or a corporation. But keep in mind that you have to comply with all formalities that are required by law which will take additional time and effort on your part. You need to draw a clear line between your personal assets and business assets. Otherwise, you will be subject to “piercing the corporate veil” or commonly known as alter ego liability. For small businesses and closely held businesses this is more important in case of a liability action. Third parties could go after alter ego liability subjecting your personal property.

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