PRINT THIS PAGE

HOW NOT TO PROTECT ASSETS

ESTABLISHMENT OF A CORPORATION FOR ASSET PROTECTION

“My assets are protected because they are owned by a corporation.”

No they’re not. Your stock in that corporation is an attachable asset. Your creditor can take the shares of your corporation.

He can then liquidate the corporation and take all its assets.

Sometimes courts will “pierce the veil” of corporations, including limited liability corporations, and hold the shareholder liable for corporate acts or the corporation liable for a shareholder’s acts.

Courts are more inclined to pierce the corporate veil when corporate formalities are not strictly adhered to and when corporate and individual funds or assets are commingled.

• Are your corporate books up to date?

• Do you have proper minutes of annual meetings?

• Do you pay personal expenses with corporate checks?

Sometimes, individuals are sued in their corporate capacity, e.g., for negligence as an officer or director of the corporation.

Often individuals are asked to personally guaranty the debts of their corporation.

In either case, your personal assets are at risk.

Corporate protection is minimal at best and often non-existent.