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Protecting Your Limited Liability: The Corporate Veil

A Corporate Veil protects you, as a business owner, from being sued in your personal capacity, in the event that your business is sued on a debt or for a liability.

The main five ways to avoid having your corporate veil pierced are simple.

  • File Annual Registration with Secretary of State: You must file an annual registration with your Secretary of State. Failure to maintain annual registration can result in your state automatically dissolving your company.

  • Keep business contracts, assets, and liabilities in business name: This is important as it provides you protection from any debts or liabilities that the business may incur.

  • Sign the business contracts and agreements in the business name: Make sure you sign ALL business contracts and agreements in the business' name. Signing in your personal capacity can lead to you being sued and held personally liable, in the event that a lawsuit is brought against you.

  • Follow the operating agreement, if there is one: It is always best to have an Operating Agreement in place. Depending on your state, the Secretary of State will have a default Operating Agreement that governs your business.

  • DO NOT COMMINGLE FUNDS! This is the most common way that people's corporate veils are pierced. Paying for business expenses out of your personal account and paying for personal expenses outside of your business account, can cause your corporate veiled to be removed.

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