Avoid Piercing the Corporate Veil

Shadow Theatre by tamadhanaval, Piercing the corporate veil

Shadow Theatre by tamadhanaval

After I published the blog post on starting a business in Arizona, someone asked me if there was anything wrong with using PayPal to accept business payments if their PayPal account is connected to a personal bank account. I cringe when I hear stories like this.

One of the benefits of creating a business entities is it limits your liability. If you have a corporation or an LLC and the business gets sued and loses, the prevailing party can only take the business’ assets if the business is set up properly. They can’t go after your personal home, car, bank accounts, or other possessions.

You get this protection by keeping the business assets and your personal assets separate. Your business needs its own bank account, credit card, etc. You should pay for business expenses with the business accounts and personal expenses with your personal accounts. If you don’t keep your accounts separate and you lose in a lawsuit, the prevailing party could make the argument that the business is not a separate entity but is merely an alter ego for you. If that happens they can take assets from the business and your personal property to collect their damages.

Creating an LLC is a good start to protecting yourself against personal liability, but it may not be enough if you don’t keep your business and personal accounts independent from each other. Services like PayPal are so easy to use that it will be simple to create separate accounts for business and personal use.

If you have questions about whether you’ve properly set up your business to protect yourself against liability, please contact a business lawyer (like me) in your community.

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Please visit my homepage for more information about Carter Law Firm.

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Comments

  1. Marcy Diaz says:

    Thank you for the reminder. Your post about Pinterest was also a good reminder about copyright infringement, just in case.

Trackbacks

  1. […] Remember one of the benefits of having an LLC is to protect your personal assets in the event that the business is sued. If you set things up correctly, only the business assets will be on the line, but to do this you must keep your corporate veil intact. […]

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