Info on Corporate Veil
If you are thinking of forming a business whether sole proprietorship or partnership, you should consider options like limited liability company. One of the things you realize is that 34% of businesses in the US are LLC and 19% corporations and most of such businesses start at home because of limited capital. You start again a lot by registering your company as a limited liability company. One of the main reasons is that people enjoy corporative veil because you are offered protection against any liability and from creditors. One of the things you learn is that it is very legal and no creditor can be able to touch your personal assets or retirement savings.
There are instances, however, where you will not get full liability protection even when you register your company as a limited liability company. This is to mean that the creditors can actually sue you and seize your personal assets. You will hear a lot people talking about passing the corporate veil because it gives them the ability to pierce the corporate veil. Discovering more about different situations that can give the creditors the right to pierce the corporate veil is very important to avoiding them. For example, if you engage in activities that sacrifice public good for corporate gain might find yourself with the situation. Additionally, they can do the same if you are using your business credit card to finance your personal bills. You can also use this protection if you are missing corporate records of failure to comply with different obligations.
There are strategies you can employ to ensure that you are fully protected. One of the things you definitely have to do is ensure that business registration compliance is kept. You can ensure that you get federal tax ID, adopt LLC operating agreement and also secure business licenses and permits. The ongoing compliance requirements such as submitting annual report, remitting taxes and reviewing licenses and permits are also important.
You also need to set a business bank account. As stated above, if you use credit cards to finance personal items, you will give the creditor an opportunity to pierce the corporate veil and therefore, you want to ensure you are separating personal expenses from business expenses. It is also good not to involve yourself in becoming a guarantor for business loans because then the creditor can pierce the corporate veil. Avoid any legal trouble because it can open a door for them to do so. Illegal businesses can be a reason why a creditor can sue you legally and pierce the corporate veil. To safeguard your liability protection ensure that you are learning as much as you can.