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6 Rookie Mistakes that Destroy Your Personal Asset Protection

Lucere Legal helps small business owners avoid stupid mistakes

Establishing a business entity–be it an S-Corp, LLC, etc.–is a vital step for most entrepreneurs. Incorporation offers a range of beneficial effects: Protection of personal assets; lower taxes; and ensured longevity for your business.

Provided, of course, that you avoid the six rookie mistakes (as documented in a recent article at Entrepreneur.com) that will land you in a situation in which not even a corporation or LLC will protect your personal assets:

Providing a personal loan guarantee for the business.  Here’s the Catch-22 for the first-time entrepreneur: Lacking a solid base of investors, many turn to loaning their personal assets to the company until it is viable. Though it may be necessary and well-worth the risk, be well aware that your limited liability protection for that debt is forfeited.

Signing your own name on a contract.  Any signature you make for your company–whether on a contract or a purchase agreement–must never be merely in your own name. This may render a contract unenforceable or put your assets on the line for a purchase. This careless mistake is made by too many entrepreneurs. Always be sure to include the name of the business and sign in your business capacity so it is clear you are signing on behalf of the company.

Using a personal credit card for business expenses.  Using your personal credit card for any business debt leaves you personally responsible.

Violating the law.  Any violation of the law eliminates the protection afforded you by your LLC or corporation.  Misrepresenting yourself or your financial situation on a loan or credit application also counts here.

Incurring a malpractice or negligence claim.  Anyone open to personal liability litigation through a claim of negligence or malpractice–doctors, lawyers, and a number of others–must have a robust professional liability insurance policy to protect against these claims.

Failing to keep your corporation or LLC in compliance.  State laws lay out specific formalities that must be followed by both corporations and LLCs, and failing to comply to these formalities can lead to the loss of your personal liability protection. To ensure your business is compliant with these regulations, we offer a program for our business clients that includes regularly updating, since your needs and the needs of your business will tend to change over time.  We offer a service that proactively monitors your business on a regular basis, to ensure you remain in compliance and that your legal protections are always in place if and when you need them.

To learn more about maintaining your business compliance, contact us at (612) 206-3701 or on our contact form to schedule a small business consultation session.  When you work with us, we take care of the legalities so you can focus on doing what you do best: building a firm financial future for you and your family.

Image courtesy of stockphotos/freedigitalphotos.net

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There's a handful of legal topics that business owners should be familiar with, at least on a rudimentary level, to reduce the risk of having something horrible come out of left field.

This book is a legal guide to help you put the most common business legal issues on your radar, with enough information for you to be on the alert for when you may need to get some professional advice.

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Do you have a cabin?

The first generation that buys a cabin enjoys it to the fullest and it’s a magical place where happy memories are made and families go for some much needed respite. Unfortunately, without thoughtful planning, the chances of the cabin staying a place of happiness and tranquility into successive generations is very, very slim.

If you haven’t done the planning in advance and made it legally binding, the family members (and their ex-spouses and new spouses) will have to work every detail out for themselves. If they can’t, what is likely to happen is a lawsuit called an action for partition that forces everyone to sell their interest. This lawsuit is expensive, and the costs of litigation will come out of the proceeds of the sale of the cabin, so to add insult to injury to those who wanted to keep the cabin but couldn’t afford to buy the others out, they are footing part of the legal bills in the lawsuit against them. Ouch!

It’s no wonder that family members stop speaking for years after the cabin conflict is “resolved.” You can’t make family relationships perfect, but you can take away much of the fuel for the family conflict fire. That’s what cabin planning does, and it has the nice side effect of giving you peace of mind now.

That’s why Kimberly wrote The Minnesota Cabin Planning Guide and Workbook, and you can get a free electronic copy of her book on our cabin planning website, or you can find it in many county libraries in Minnesota, or you can get it on amazon.com.

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