Protecting your Assets — I am Incorporated Now What do I do?

I work with business owners all over the South Shore.  Whether the company is in Duxbury, Plymouth, Kingston, Hanover or any other town, I seem to run into the same problem. 

People decide to set up a corporation or a limited liability company (“LLC”) so that they can protect their personal assets.  If set up an operated properly, a corporation or an LLC can provide much needed protection so that if something does go wrong with your business, your personal assets are protected from claims.   

What I have found over the last 20+ years in practice, is that too many people view the establishment of the corporation or the LLC as the last step in a process to protect their assets.  In reality, once you have set up a corporation the work has just begun.  If you want to make sure your assets are protected it is important that the legal entity be operated properly to reflect its existence.  What do I mean? 

To provide the sought after protection you must make sure that you are running your business as a separate entitle from yourself.  To do this you should do the following: 

  1. The entity should have a separate bank account.  Don’t run the corporate expenses through you personal checking account.
  2. All contracts should be between the entity and the customer or the supplier.  Pay close attention to this if you were already doing business and then formed a legal entity. 
  3. When you sign a document on behalf of the company make sure you sign it as the “president” of the company or the “manager” of the LLC.  If you just sign your name without the title it may be unclear if this is a contract with you personally or with the entity.
  4. If you are required to provide a personal guarantee, and sometimes a bank or landlord may require a personal guarantee, make sure you understand what you are signing.
  5. File your annual report with the secretary of state’s office to make sure your entity is in good legal standing. 
  6. Make sure you have a minute book with all of your important documents.  If you at the very moment you are saying to yourself “What is a corporate minute book?”  Please call your lawyer and have him or her help you set up the necessary documents. 

The above items are some of the main points that are important to protecting your personal assets.  The time to take these actions is not after you are served with a lawsuit.  The time to follow these actions is now.

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