Risk is always present in the world of business. How can you protect your assets from the effects of a fire, or a burglary, – or a pandemic?

While we cannot fend off every calamity, there is much you can do that will help you through the trials. Proper business insurance is a necessity.  But most people don’t realize how much is riding on how you have organized your business legally.  You need to be sure to structure it in a way that keeps your finances intact and maintains your integrity as a legitimate enterprise.

The most common legal entity for a business is a sole-proprietorship, Corporation (S or C), partnership, or an LLC.  

Each entity structure has pros and cons.  You are best to get professional direction as to which entity choice is best for your unique situation. It may be a timing issue that dictates the proper choice.  Sometimes it may be a combination of entities rather than just one by itself.  You will want the best combination but should keep it simple at the same time. Educate yourself on the options, get professional direction, and use common sense.

You may find your business running under an entity that you did not choose when you do not elect a specific business formation. How can that be?  If no choice is made, your business will default to a type of entity based on the way you have conducted your work activities.  If you do not know what that is, I recommend you speak with a professional advisor immediately to find out because it can seriously impact your business by overpaying your tax liability or lack of proper asset protection.

Sole-proprietorships have the least amount of protection.  However, that does not mean that it is a wrong entity choice for you.  

S & C-corporations and LLC’s typically offer more legal protection and other benefits but have stricter legal responsibilities. Regardless of your company’s structure  — whether it’s a C-Corp, an LLC, or an S-Corp — you will have to do what is necessary to protect your corporate veil.  You must take these obligations seriously!  

But the good news is – it doesn’t have to be hard!  To make it easy to understand, here is a simple list of important considerations:  

Why did you form your entity?

Many business owners incorporate to:

• Reduce their personal liability for the debts of the business
• Minimize taxes
• Add credibility to 
• Their customers
• Their vendors
• The IRS and state taxing authorities
• Deduct employee benefits
• Gain easier access to capital funding
• Transfer ownership easily
• Centralize management
• Have anonymity

Courts can “pierce the corporate veil” and hold the shareholders personally liable for the debts of the corporation if any of the following are present:

• The filing of timely proper tax returns and other legal formalities are ignored
• Minutes, bylaws and corporate records are not maintained
• The entity was not adequately capitalized
• Failure to issue stock 
• If an individual treats the company assets as his own
• Commingling of funds and other assets (mixing personal and business together)
• If corporate funds or assets were diverted from the entity to other than company uses

What should I do to safeguard my business entity and hard-earned assets?

• Have a separate business checking account for each business
• Hold an annual meeting
• Update your  minutes at least annually
• Establish bylaws and review them at your annual meeting
• Pay yourself a reasonable salary
• Quarterly Tax Planning
• Use an accounting software package (we recommend QuickBooks)

How can I simplify this process?

Our office can help you with:

• QuickBooks setup and training OR monthly bookkeeping service
• Professional preparation of Bylaws and Corporate Minutes
• Payroll processing and payroll taxes
• Professional direction of advanced tax strategies through regular Tax Planning
• Preparation of all federal and state corporate tax returns

Keeping in mind that risks are real and that the courts will still be able to pierce the veil, it’s important to know what you should do to secure your assets. 

Effective accounting is perhaps the most important part of maintaining a robust corporate structure. You also need to uphold transparency by documenting meetings and keeping a file of the minutes. 

You also need to keep your taxes in order and create separate accounts for each entity that belongs under the same umbrella. 

These simple tricks should help you maintain a solid business structure, so it’s properly insulated in the event of a disruption.

However, you still need the help of certified legal and accounting professionals to ensure your business operates as a full-fledged entity.

If your entity paperwork is not in order: you are at risk to lose everything!

But there is no reason to fret; you can save your business from going under. 

SAVE YOUR ASSETS!

WE ARE HERE FOR YOUR SUPPORT-

Call Business Untangled today!