Your business can be a fortress, or it can become a significant liability. It just depends on the actions you take. These four strategies can help you to build a business that adequately separates its mission and activities from your own personal liability.
Adopt a Limited Liability Entity. Form an LLC or Corporation as applicable to your needs. When properly formed, these entities allow business owners or investors to achieve personal liability protection, limited to the value of investment in the company or partnership. The business itself can be sued, but not the individual owners or investors.
Form and maintain your business correctly. Work with a business planning attorney to understand the benefits, limitations, and responsibilities of your LLC or Corporation. Form the company correctly and then maintain it as required by law.
Craft solid contracts. Unfortunately, the old “handshake agreement” just isn’t effective or protective in this day and age. You need solid agreements with vendors, sub-contractors, and anyone else with whom you do business.
These contracts are the bedrock of your company, so take the time to do it right the first time. Each contract should be specifically drafted for your business, with your priorities and necessary protections in mind. Then, continually update every contract as the situation warrants.
Separate yourself from the business. Avoid mingling personal and business funds, accounts, or resources. In the event that you end up in court for some reason, there should be no doubt as to where the business ends and you, as an individual, begin.
For more information on correctly forming and maintaining your business so that it adequately protects you, contact us at shouplegal.com. Our business planning attorneys will help you identify your options and implement the appropriate protections.