Are you a business owner? If so, you probably consulted with an attorney when you decided to open your business. You were given options for the structure of your particular business and likely opted to set up a corporation or a limited liability company (“LLC”) to protect your personal assets from being used to satisfy your business debts. Your attorney prepared the required papers and filed the necessary documents with the state. You feel comfortable that your personal assets are safe. Unfortunately, merely forming a corporation or LLC is not necessarily sufficient to protect your personal assets from being used to satisfy a judgment or pay a claim made against your business.
How long ago did you form your business? Have you complied with the law to keep your business records up to date? California law requires that business owners follow and maintain business formalities in order to take advantage of the protections offered to corporations and LLCs. Corporations are required to hold an annual meeting and keep corporate minutes up to date. You must ensure that your personal finances and business finances are segregated.
Your failure to comply with applicable laws could result in personal liability for your business debts. In legal terms, this is called piercing the corporate veil. If a court finds that you did not comply with the governing laws for your business form, it will treat your business as a sole proprietorship. This opens your personal assets as a source to satisfy a judgment against your business.
Thus, it is essential that you comply with California law to maintain your chosen business form and safeguard your personal assets.
For further information or to schedule an appointment, call Joyce Helock at 661-414-7123.