Hi, Mark, Kohler here with another two-minute tax and legal tip let's talk about the corporate veil protecting yourself in a corporation or LLc
Limited liability company now just this week had a phone call from a client said mark
I was at a presentation in and they said that I can get sue personally even if I have an lLC or corporate they don't
Protect you anyway. I was like what that's ludicrous now if you have an entity and you don't protect it
It is true that you can get sued personally, that's what this
Protecting the corporate veil is all about whether it's an LLC or a corporation
So let's go through four ways to prevent you from getting sued personally and protect you with the corporate veil
Number one are corporate records corporate records are critical and I'm talking about an LLc or a corporation
It's not just one sheet of paper. You've got to file all the extra paperwork into a
record-keeping corporate book and with an lLC that means an operating agreement
membership certificates
minute minutes and an
organizational meeting and in a corporation bylaws and your first directors and shareholders meetings
And then every year you're gonna have annual meetings to update those even if you're an lLC. It's not just one sheet of paper
Oh, I don't need to call a lawyer or do this or do that, or I'll just rely on someone
That's not a lawyer and I'll just do it for 99 bucks
Folks those are the people getting sued personally
Because they don't even have a bank account for their company or the paperwork to show that it's a legitimate company
Do it and keep good records?
Number two use the company name on all of your company documents and marketing materials your company is doing business
not you
so use that company name on your email signature on your
letterhead on your business cards you are the president of company you're the manager of the LLC and
Then the company name is set forth out there for the world use the company name and let the world know that your company exists
Number three make sure your company name is on all of the legal documents and agreements for example in an LLc
if you own a rental property
On the lease agreement, it's the lLC that should be on the lease doing business with the tenant not you
It's the company on the lease agreement
and if you're a corporation and hiring subcontractors or having employment agreements or
Anything that where you're gonna buy equipment or something like that on a legal contract it should be the company name on the contract not
You be careful when you put your name out there because then it can suck you into a lawsuit
Personally if you're not letting the company do the legal document number four make sure that your company is on title to any
assets or equipment the company owns for example back to a rental property should your name to be on title no no no the
LlC's should be on title just this week
I had a phone call with a client that had an lLC in a rental property and
Llc
Wasn't even registered to do business in that state and the rental property was in the name of my client not the LLc
Do you think they're gonna get any protection if there's a problem none whatsoever
So make sure that you transfer title even after closing into the LLc
Don't worry about the due on sale Clause
There's exemptions for this and many many mortgages and as long as you're paying the mortgage the banks aren't going to care and worst case
Scenario you'll put it back into your own name if the bank has a problem, or you need to refinance down the road
but get that title transferred into the lLC and look out for transfer tax in certain States, but
98% of the time you're going to be fine
And that's going to open up that protection that the lLc is there for you and in a corporation if you're buying equipment or some
supplies or dirt or certain things where you need to hold title in the name of the
Company make sure that the company is the one doing business again and not you in summary the corporate Veil is
Powerful it's been around for hundreds of years
And it will protect you in an LLc a limited partnership triple LP Corporation s Corp C
Corp the same principles apply, but you've got to take care of it if you don't protect the corporate veil it won't protect you
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