Starting a business is a good thing whether sole proprietorship or partnership, but the most important thing is to a great decision especially when it comes to registering it as a limited liability company. As you read more on small businesses, you realize that nearly 34% are small businesses and 19% corporations and it is said that 69% of them begin at home because of limited capital. There are very many benefits of forming an LLC as you will learn. Majorly, many people go for this option because it offers protection against creditors and any other liability, which is also known as corporative veil. Corporative veil is legal and there is no creditor that is able to touch your personal assets or even 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. That can give the creditors the legal rights to sue you and seize your personal assets and that can be dangerous. A situation where the debtors can pierce the corporate veil is also known as piercing the corporate veil because they can do that. There are very many circumstances where the debtor can pierce the corporate veil. For example, if you engage in activities that sacrifice public good for corporate gain might find yourself with the situation. Another situation that can lead here is when you are using business credit card to finance different personal bills and therefore making you lose liability protection. 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. Here, you need to do various things like securing business licenses and permits, adopting LLC operating agreements as well as getting federal tax ID. You might also want to know more about the ongoing compliance requirements as long as the business is operational and that can include remitting taxes, submitting annual reports and reviewing licenses and permits.
You also need to set a business bank account. This way, you are able to separate 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. Do your best to avoid legal issues. The creditor can pierce the corporate veil, if you have a record of being involved in illegal businesses. To safeguard your liability protection ensure that you are learning as much as you can.