Setting up a new business venture seems simple enough, particularly with all of the information available online. Many believe once they file their LLC or corporation with the Secretary of State, their business is established and they are protected from personal liability. Unfortunately, that belief is not accurate.
While technically the corporation or LLC exists upon filing, there are several reasons why the individual business owner still may not benefit from any corporate protection. Many business owners do not keep up with annual requirements and fail to take all necessary steps to protect their assets and personal interests. As attorneys who often must be creative in identifying assets to satisfy debts owed by corporate debtors to our clients, one of the first steps we take is to determine whether there is any basis for officer liability. The average business owner is the sole owner of his or her business, incorporated the business without legal assistance, and is not educated with respect to the legal formalities of establishing and maintaining a corporation or limited liability company. As a result, business owners are often subject to personal liability despite the existence of a corporate entity.
It is our hope that our clients do not have to face these easily avoidable issues. We can help your business achieve the protection that the corporate structure is supposed to provide and would be happy to discuss your corporate status and documentation with you.
Some of the issues that are often overlooked by businesses with more than one owner is what happens to the business upon the death, retirement or resignation of one of the partners, what each owners’ rights and obligations are, and what to do in the event of a dispute among the owners. These are issues that must be discussed before they occur, or expensive litigation may be inevitable.
When establishing a business or reviewing your business records, it is imperative that a business owner develop a thorough plan that addresses common issues and events in the life of a business. Whether you are starting a new business or focusing on improving an existing one, legal planning can be equally or more important as the other aspects of business planning.