In our section on liability, you learned that there are two basic types of liability: Personal and Professional.
Personal liability is that which comes from you as an individual, such as causing a car accident. This liability puts your personal assets at risk and can even spill down to attach your business assets as well.
Professional liability is that which comes from your work as a professional business person, such as managing property. This liability puts your business at risk and can even reach up to attach your personal assets as well.
A solid and proper business entity provides a shield between your personal and business assets, protecting your business assets from personal liability, and protect your personal assets from your professional liability!
The key is to form the correct entity, and then maintain it throughout the life of the asset. How do you do that? Well… Here are some of the issues that you need to be aware of:
- Proper Entity: Sole Proprietorship, Corporation, Limitied Liability Company, Partnership, Trust. Each has its own benefits and drawbacks. And they do NOT all provide the same protection!
- Proper Organization: Management (member or manager), Membership (single v. multiple owners), Tax Elections (partnership, S-status, corporation), Holding companies. How you set up and organize your business entity or entities have legal ramifications.
- Proper Documentation: Articles of Organization, Operating Agreements, Loan Documents, Minutes, Authorizations. Filing the online papers with the state does not provide protection. You are setting up a legally-recognized entity and there are obligations that come with that.
- Proper Funding: Contract novations& assignments, Deed transfers. Most business owners forget this step. Unless you actually transfer ownership of the asset to the company, it’s not protected. That transfer takes a written agreement.
- Proper Maintenance: Meetings, Book Keeping & Accounting, Contracts, Employees, Taxes. This is also a reason why people lose their liability protection. If you co-mingle funds, improperly take loans, fail to have meetings or take minutes, don’t pay quarterly taxes and etc, you could lose the protection you initially sought.
We know all this seems overwhelming. But please, don’t worry! Millions of entrepreneurs successfully set up and maintain their businesses. All you need is a bit of assistance!
Breglio Law Office is here to help. Large businesses have a host of lawyers and consultants to make sure they are run as efficiently and legally as possible. Now, even small entrepreneurs can have access to the same help! Breglio Law Office offers very affordable consulting services to help you navigate the legal waters and protect your assets! Even you can afford your own corporate counsel.
THIS INFORMATION IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE LEGAL ADVICE. PLEASE CONSULT AN ATTORNEY.