Want To Save Your Ass-ets?

You saw it in the news last night. 

Someone’s business was involved in an accident or a tragedy and it wasn’t even their fault!  

Did you know they are at risk of losing EVERYTHING if their business is not set up to protect their family?  

While we may not be able to avert tragedy, we can minimize the loss by doing simple things to keep our business structure intact to do what it is designed to do – protect  us.  

What shape is your corporate entity in right this minute?

When you started your business you were so diligent to do the right thing. 

You incorporated your business like you were advised to and then what happened? 

Maybe you got busy running your business or simply life just happened? 

Either way, you got lax with implementing the proper procedures to maintain the integrity of your entity.

Whether you own a C-Corp, an S-Corp or an LLC, your company is in jeopardy of having the corporate veil pierced if you are not upholding the proper corporate formalities. 

Piercing the corporate veil is a legal decision by the court to put aside the separate rights of a corporation and hold the shareholder and directors personally liable for its debts and actions. 

As you can imagine, this can have serious ramifications.

How healthy is your corporate veil? 

Reflecting on these points will give you an indication of your personal situation and some things you might need to do.

Why did you incorporate?

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 shareholders personally liable for the debts of the corporation if any of the following is present:

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

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

• Have a separate business checking account for each business

• Update your corporate minutes at least annually

• Hold an annual meeting

• Establish bylaws and review them at your annual meeting

• Pay yourself a reasonable salary

• Quarterly Tax Planning

• Use an accounting software package. 

Your entity properly implemented can save you tens of thousands of dollars while providing you with protection and peace of mind!

Don’t let these responsibilities overwhelm you. 

While it may sound overwhelming, just know it doesn’t have to be. 

A well-qualified professional can help demystify these duties and simplify them for you without you driving yourself crazy. 

It is worthwhile to save your assets!