While there are many types of business structures in the U.S., few offer more protection for business owners than limited liability companies. After all, according to reporting from Business News Daily, LLCs protect personal assets from the company’s creditors. This means you mostly do not have to worry about losing your personal wealth because of poor business decisions.
While the protections LLCs offer to members are expansive, they are not absolute. If a court decides to pierce your LLC’s corporate veil, your personal assets may be at risk. That is, piercing the corporate veil allows your company’s creditors to go after your personal wealth.
What causes courts to pierce corporate veils?
In theory, there are many reasons a court may decide to pierce an LLC’s corporate veil. In practice, though, you are most at risk if you do one or more of the following:
- Use your LLC to break the law
- Commingle personal and LLC assets
- Use your LLC as a shell to avoid liability
How can you keep your LLC’s corporate veil in place?
You obviously do not want any court to hold you personally liable for the debts or actions of your LLC. Luckily, it is not too difficult to keep your LLC’s corporate veil in good shape.
Simply by keeping g comprehensive business records, following the law and maintaining a firm separation between you personally and your LLC, you do what you can to keep your LLC’s corporate veil intact.
Ultimately, though, because your personal assets may be on the line, you should take any attempt to pierce your LLC’s corporate veil seriously.