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If You Kill Superman, Clark Kent Dies Too… Understanding the danger of an alter ego from a legal perspective.

If You Kill Superman, Clark Kent Dies Too… Understanding the danger of an alter ego from a legal perspective.

A conversation that happens far too often with new clients looking for legal help for their new business:

Client:           “I’ve started a new business and I’d like to have a lawyer handle the legal parts of the business.”

Attorney:      “Great, we would be glad to help you.  When do you plan to start transacting business?”

Client:           “Well, I have actually been in business for eight months already.”

Attorney:      “I understand. We need to make sure that you are protected from personal liability to the extent permitted by law.  Depending on the type and nature of business you are transacting, we may want to form an entity, typically an LLC or a corporation, and make sure that you are transacting business only under that entity.”

Client:           “I’ve already done that.”

Attorney:      “Ok great, did you form an LLC or a corporation?”

Client:           “Neither, I went to the county office and filed a DBA/Assumed Name form.”

Attorney:      “A DBA/Assumed Name is not designed to, nor can it protect you personally from liability.  It is simply and alter ego of yourself.  An LLC or a corporation, on the other hand, is a separate “being” from you legally.  It can do most things from a legal perspective that a person can do, like buy and sell personal property and real estate, it can sue and be sued, hire and fire employees, and even, when necessary, file bankruptcy, all wholly separate from you individually”

Client:           “So how is that different from a DBA?”

Attorney:      It’s the difference between Batman and Robin vs. Superman and Clark Kent.”

Client:           “Huh?”

Attorney:      When you form an entity, that entity can stand on its own and transact business on its own, completely separate from you.  You and your business are separate “people” like Batman and Robin.  A DBA/assumed name on the other hand is like Superman and Clark Kent.  Your “business” under the DBA/assumed name is like Superman and you individually are like Clark Kent.

Client:           “That doesn’t seem like a bad idea if the Business is Superman, and I am Clark Kent.”

Attorney:      “Sounds OK, until the villain hurts or kills Superman.  You kill Superman and Clark Kent dies to”

Client:           “Oh… I get it… So how quickly can we get an entity formed?”

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