When a Georgia entrepreneur considers starting a business, one of the issues requiring careful attention is how to protect the assets of the owner in case a claim is ever filed by an individual, entity or taxing authority against the company. The first decisions that will determine what personal liability an owner will confront occur during business formation. However, it is an ongoing process to maintain a level of personal protection.
Many small business owners believe that operating as a sole proprietorship is the easiest way to do business. However, this leaves the owner vulnerable because his or her personal assets can be attached. A limited liability company (LLC) or S corporation may require additional tax planning, but personal assets are afforded a great deal more protection.
It is not enough, however, just to form one of these entities. Certain actions must be taken in order to maintain an entity’s status. The company needs to have its own bank accounts, property and corporate records. Commingling assets or monies can allow an owner’s personal assets to be seized for payment of the company’s obligations. If the business fails to remain in good standing with the state of Georgia, the owner could be held personally liable as well.
Starting a business can be an exciting prospect, but if an entrepreneur fails to take the issue of personal liability into consideration during business formation, that elation could give way to financial concerns. Choosing the right type of business entity can make all the difference in protecting an owner’s property. Understanding what rights and responsibilities come with each type of entity can help in making a choice that will work best for the business while protecting the owner from personal liability.
Source: entrepreneur.com, “8 Things You Must Do to Protect Your Assets“, Mark J.Kohler, May 7, 2015