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6 Circumstances Where an LLC or Corporation Won’t Provide Asset Protection for Personal Wealth
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6 Circumstances Where an LLC or Corporation Won’t Provide Asset Protection for Personal Wealth



Many business owners establish their enterprises as a limited liability company (LLC) or corporation for asset protection purposes.
If your business is incorporated, your personal wealth is generally shielded from business liabilities like debt or litigation.

However, there are some circumstances under which your asset protection could be jeopardized, including if you:

Use your own name on a contract.
Signing a contract with your own name instead of the name of the company is a common mistake, but one that could cost you if the contract becomes the subject of litigation.

Personally guarantee a loan. 
It is not unusual for entrepreneurs starting new business ventures to provide a personal loan guarantee to get the business off the ground. However, you should be aware that you are surrendering the limited liability protection for that debt.

Charge business expenses on a personal credit card. 
This is just another way of providing a personal guarantee on a business loan, and the debt you incur on your personal card will not be protected.

Incur a negligence or malpractice claim. 
Attorneys, physicians or other professionals who run a greater risk of incurring a claim of malpractice or negligence need to have a professional liability insurance policy in place to protect their personal wealth from these claims.

Do something illegal. 
The liability protection of your LLC or corporation will be lost if you break the law, including if you misrepresent yourself on a credit or loan application.

Don’t follow the formalities to keep your LLC or corporation in compliance. 
There are certain formalities that must be followed in order to keep a corporation or LLC in compliance and maintain personal liability protection for the owners. If you fail to follow these rules, your liability protection could be lost.

Since your business will undoubtedly change over time, it is wise to regularly review your corporate structure and practices with a qualified Florida business attorney who can help ensure that your LLC or corporation is in compliance, and that the asset protection for your personal wealth is not at risk.

ABOUT THE AUTHOR: Romy Jurado
Romy Jurado is one of the founders of Jurado & Farshchian, P.L. a business, real estate and immigration law firm. She focuses her practice on business law, including corporate and transactional matters with an emphasis on corporate formation, stock and asset sales, contract drafting, and business immigration. Romy is originally from Peru and moved to the USA with the dream of becoming an attorney and entrepreneur. Romy is actively involved in the community through her work as a Score certified mentor, and speaking at conferences to entrepreneurs and small business owners.
 
Copyright Jurado & Farshchian, P.L.
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Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.
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