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How strong is your LLC’s corporate veil?

On Behalf of | Jun 28, 2022 | Business Law |

If you are an entrepreneur, you undoubtedly have extensive knowledge about your product or service. You may not be so familiar with business organizations, however. If you have taken advantage of the benefits of forming a limited liability company, you should be cautious about protecting your venture’s corporate veil.

According to the Cornell Information Institute, the corporate veil is the firm line of separation that exists between you as a person and your business entity. If someone seeks to pierce your company’s corporate veil, your personal assets may be accessible to your creditors and others. Consequently, it is critical to keep your LLC’s corporate veil intact.

What causes the piercing of a corporate veil?

You do not want your creditors or anyone else to go after your personal wealth. Therefore, you must be sure you understand how to keep your corporate veil in good shape. Arguably, the most effective way to ensure your creditors cannot pierce your corporate veil is to avoid commingling business and personal assets.

If you commingle your business assets with your personal ones, a court may see little difference between your business venture and your person. That is, if there are shared accounts or any other commingling of assets, a court may allow your credits to pursue your personal wealth.

Do you have business formalities?

Another easy way to keep a court from piercing your LLC’s corporate veil is to keep comprehensive business records. Often, this requires going through the sometimes exhausting business formalities that relate to your LLC. While staying on top of an LLC can easily become an afterthought, having comprehensive business records may help to protect your personal assets.

Ultimately, by keeping your LLC’s corporate veil intact, you can avoid many of the worries that come with potentially risking your personal wealth.

The information contained in this publication should not be construed as legal advice. Should further analysis or explanation of the subject matter be required, please contact the lawyer with whom you normally consult. No attorney-client relationship is created by this post.

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