To maximize protection of your personal assets from liabilities associated with your business properties and operations, ALWAYS observe the following basic formalities. (This is not meant as an exhaustive list; corporations and other specific types of business organizations have additional requirements that are beyond the scope of this simple checklist).
- Have proper company formation documents prepared and registered with the appropriate government authorities, and update these documents as the law requires.
- Maintain the company’s records in a careful, business-like manner.
- Maintain separate operating and investment accounts for the company. Do not mingle personal expenses and assets in these accounts.
- Disclose your business capacity in all dealings with vendors, customers, tenants, the public, the government….everyone. Stationery, checks, invoices, deeds, leases, contracts, tax returns, advertisements, business cards, and any other form of communication must inform other parties that they are dealing with a limited liability entity and they are dealing with you not as an individual but in your representative capacity. Always disclose your representative capacity (President, General Partner, Manager, etc.) when signing any document related to company business.
- Company owners should hold meetings and document them with written minutes even if not required by law, on at least an annual basis. This will provide useful historic documentation for the business as well as further demonstrating the legitimacy of the business as a separate entity from the individuals involved.
- Report and pay all taxes appropriately.
Failure to observe these formalities will threaten the integrity of the entity and its limited liability protection. Remember . . . “no pain, no gain!” If you need assistance establishing a business entity or a review of your entity maintenance procedures, please contact Mike Smeenk.