Finance Law For Startups: What You Need To Know
Limited Liability and How to Protect It
Setting up as an LLC or corporation offers the allure of limited liability, protecting personal assets from business debts. Yet, many founders misunderstand the limits of this protection, unknowingly crossing boundaries that unravel their shield of security.
Commingling personal and business finances, or failing to adhere to corporate formalities like maintaining separate bank accounts and meeting minutes, can ‘pierce the corporate veil’. This means personal assets can become fair game for creditors. Are you inadvertently jeopardizing your safeguard?
Another underrated hazard arises if your entity is formed in a state where you don’t do primary business. Tax complications, revoked licenses, or invalid contracts are risks resulting from such overlooked legal nuances. It’s crucial to ensure your business setup aligns with operational realities.
Consulting corporate attorneys to establish and maintain the integrity of your entity’s legal structure is a wise move. With their aid, you can appreciate nuanced layers to safeguarding your limited liability status you might not have considered. But the foundational action missed most often might catch you by surprise.