WILL A CORPORATION PROTECT MY PERSONAL ASSETS FROM BUSINESS DEBTS?

Yes, if you follow a few simple rules:

  • Form the corporation fully and completely (this means issuing stock for consideration, electing directors, appointing officers, adopting bylaws and filing all required state and federal forms).
  • Adequately capitalize the corporation at its inception.
  • Follow corporate formalities (i.e., holding at least annual shareholder and board of director meetings and documenting those meetings with written minutes).
  • Do not commingle personal assets with business assets. This means keeping separate bank accounts and not paying personal expenses out of the corporate bank account.
  • Do not sign any personal guarantees. This puts you back on the hook personally for corporate debts and obligations.
  • Do not engage in any criminal activity. The corporation does not protect you from an intentional conduct.

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