Are You Protected as a Business Owner?
I have drafted a lot of Articles of Organization, Articles of Incorporation, Partnership Agreements and Operating Agreements over the years. It always surprises me how many people think that once this small task is completed, they, and their personal assets are protected from liability in the event that they may face a lawsuit arising from the operation of their business.
While it is true that one of the major purposes of these various entities is to distinguish between the business and the individuals who own and operate it, simply place the letter I-N-C behind your name does not prevent an injured party from looking to your personal assets if they are successful in obtaining a judgment against your company.
Several protocols must be followed to benefit from the protection of the corporate veil; and failing to do so can be dire. The following is a non-exhaustive list of requirements that should be followed if you own and operate your own business:
- Incorporate or Organize by virtue of the law in the state were you operate;
- Adopt by-laws or other corporate governance documents and keep records of them;
- Be clear with the people you are conducting business with that you are doing so on behalf of your company and not yourself;
- Make sure the business is operating with adequate capital;
- Hold and initial and annual meeting for the company and its members or shareholders, keep minutes, resolutions and so forth and keep them with your business records; and
- Never, ever co-mingle your personal property with that of your business.
If you are operating your own business, or plan to start one soon, be sure to discuss these issues with your attorney when forming the entity. It could prove costly if you do not.
The Law Office of Dennis J. DiSabato, Jr., LLC
3888 Renee Drive, Suite 201
Myrtle Beach, SC 29579