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3 ways to keep your LLC’s corporate veil intact

On Behalf of | Nov 21, 2021 | Business Formation, Business Litigation

When you were researching business organizations before forming your limited liability company, protecting your personal assets undoubtedly appealed to you. After all, if your LLC fails, your creditors typically cannot go after your personal wealth. This is not always the case, though.

There is an imaginary veil between you and your LLC. This veil is what keeps your LLC’s creditors from going after you personally for the LLC’s unpaid debts. Sometimes, however, courts cut through this veil. Here are three ways you can keep your LLC’s corporate veil intact.

1. Keep personal and LLC finances separate

One of the riskiest things you can do is to commingle your personal assets with those of the LLC. According to the Small Business Administration, having separate business and LLC checking accounts is a good idea. The SBA also recommends building distinct business and personal credit identities.

2. Obey the law

If you use your LLC for illegal purposes, a court is not likely to award you by limiting your personal liability. Consequently, you should be certain your LLC complies with federal, state and local laws. You also may want to avoid unethical business practices.

3. Document everything

Even though LLCs have fewer formalities than corporations and many other business models, you should keep your LLC as formal as possible. Maintaining documentation about the LLC’s actions may be helpful. Furthermore, you may want to keep excellent personal records so you can show separation between yourself and your LLC.

A court is not apt to allow you to hide behind your LLC to gain an unfair advantage over your creditors. Ultimately, by adhering to good business practices, you probably do not have to worry about losing your personal assets to your LLC’s creditors.