HOW DOES A CORPORATION PROTECT MY ASSETS?

HOW DOES A CORPORATION PROTECT MY ASSETS?

Asset protection for owners is one of the primary advantages of doing business as a
corporation. A corporation is a legal entity separate from its shareholders. Generally, the
corporation itself is responsible for any liabilities incurred during the course of business, not
the owners or shareholders. This means that a business owners personal assets such as a
home, vehicle, or savings account, are safe from business creditor’s collection efforts, legal
judgements, or similar obligations.

Can personal asset protection be circumvented?

There are few exceptions to the limited liability protection provided by a corporation. These
exceptions would generally be a result of rare circumstances, such as personal negligence,
fraud, or serious compliance violations. More commonly, in some instances, an owner may act
as a personal guarantor on a bank loan, merchant account, or other business debt thus making
the guarantor personally liable should the corporation fail to meet its obligations.

To get the most benefit from your corporation and minimize risk of liability to business
owners, make corporate compliance a priority. Hold regular directors meetings and keep
accurate financial records. File annual reports and corporate tax returns in a timely manner.
Consider commercial liability insurance to help protect your corporate assets.