Typically, one of the most prevailing reasons that a business owner decides to incorporate their business is to shield them from or limit their personal liability for the debts and obligations of the business. While this is an important first step, simply forming a corporation or a limited liability company is generally not enough to maintain maximum personal protection from business liability. Business owners who have incorporated or formed limited liability companies must also be diligent in maintaining the corporate formalities of their entity. Failing to do so could result in a plaintiff attempting to “pierce the corporate veil” of the entity and hold the owner personally liable for the debts, obligations, or liabilities of the entity. Maintaining the corporate formalities is equally as important (and quite possibly even more important) when the entity only has one owner. It is not uncommon for single member LLCs or sole shareholder corporations, to become lax in the record keeping of the entity, particularly when there are not other owners holding either accountable for properly maintaining the entity’s records, policies, and procedures. Though not an exhaustive list by any means, below are a few points that every owner of an entity should keep in mind when it comes to maintaining the corporate formalities of his or her entity:
Eric R. Thiergood, Sr.
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