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Incorporation Won’t Protect Your Assets From These 5 Pitfalls

Lucere Legal helps small business owners maintain corporate compliance

Every entrepreneur who’s worth his salt already knows that shielding your personal assets from your business liabilities by way of a Corporation or a Limited Liability Company (LLC) is absolutely essential, but take care not to overlook the dangers you can remain exposed to! As powerful as incorporation can be, there remain a number of pitfalls that will leave your personal assets wholly exposed.

Indeed, Nellie Alkap of Entrepreneur.com recently covered the subject in detail. Alkap pointed out six all too common mistakes befall entrepreneurs:

Relying on a personal loan to fund a startup

Hard as it can be to find investors, it is far from uncommon for entrepreneurs to self-finance. Drawing from their personal funds, they loan the money on the assumption that they’ll have it all come back to them as soon as things are up and operational. Sometimes, they are right.Others, they could not be more wrong. If you plan to give it your best shot, simply know this: you may lose everything you put down and walk away with nothing. If you risk it, do everything possible to mitigate that risk.

Signing a contract in your own name

When it comes to legal documents, the minutiae is key. If you work out a deal with a client or a vendor, be absolutely sure that your signature includes the name of your business and your position in it. This will firmly ground the contract as being one between two businesses, rather than you specifically.

Paying for business expenses with a personal credit card

You will be held personally responsible for any debt incurred on your personal accounts, even if the expenses were business related.Maintaining a clear separation is essential.

Violating the law

It should come as no surprise that all protections afforded you by incorporation are void if you conduct your business in an illegal manner. This includes deliberate misrepresentation of yourself and your business on a loan or credit application.

Incurring a malpractice or negligence claim

If your occupation is one subject to professional liability legislation—doctor, lawyer, accountant, etc.—an accusation of malpractice or negligence can be devastating. Professional liability insurance is absolutely vital to protect you against such claims and, hopefully, fight back against them.

Failing to keep your corporation or LLC in compliance

Some business owners mistakenly think that the establishment of their corporation, once complete, requires no further action on their part. They could not be more wrong. Depending on the state in which you have chosen to incorporate, a varying amount of maintenance is required, without which you risk the loss of your personal liability protection.

This is why our office offers a regularly updating program to our business clients. With all the hard work you put into it, your business will grow and so, too, will your need to fully insulate your own assets from an unexpected pitfall. We can monitor your business proactively, ensuring that all aspects keep up with compliance to maintain that impenetrable wall between your personal assets and your business assets.

To learn more about maintaining your business compliance, contact us at 612-206-3701 or reach out via our online contact form to schedule a small business consultation session. 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 stockimages | FreeDigitalPhotos.net

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