Protecting You and Your Assets as a Small Business Owner

I remember when I formed my first company and the pride that I felt when it was official. I was off and running. My first million just a few short months away. I remember receving a package from the Georgia Secretary of State in the mail addressed to my new company. I sat back and looked at the new corporate documents with a sense of awe and amazement. 

There are different types of corporations including,  “C corporations” and “S corporations” - you name it there is a corporation for it, it seems.  If you have no idea if or how to form one (and most of us do not), there are numerous companies that can help you form your corporation and advise you as to the best type for your small business. These fees are relatively inexpensive, so do not get taken. Need some suggestions on who to contact? Email me at Matt@MattHermes.com and I will forward them onto you.

One of the main reasons any entrepreneur chooses to incorporate his or her business is to protect or shield the founders and corporate officers’ personal assets (cars, homes, savings accounts, vacation homes, etc.) from potential unpaid business debts, liability issues and other costly business dealings. 

This protection, as it is typically called is a “corporate veil,” and is designed to safeguard the things you have already worked so hard to earn as your business grows and flourishes.

What you need to make sure you understand is that the corporate veil remains in effective only if the corporation remains in “good standing” by meeting all of its corporate duties as described in your inccorporation documents and state requirements. If you drop the ball and let something fall through the cracks (and someone falls over a crack), you could be out of luck.

• A1. Never Pay Business Bills or Invoices Out of a Personal Checking Account: It never pays to pay any corporate bill directly from a personal checking account. If you have to use personal funds to pay business obligations, write the personal check to the corporation first and then document the sum as a loan advance or new investment in the corporation so that you have it down on paper as to what and how money was added to your account.   

Separate Yourself: One of the easiest ways unpaid debtors can pierce the corporate veil is by proving that the corporation was not run as a separate entity from the initial entrepreneur or corporate officers. Do not sign documents as it relates to the business without noting your corporate title and company name on all invoices, loans, etc.

File all tax returns and annual reports on time. Georgia is getting more restrictive as it pertains to incomplete documentation and late filings. Make sure your corporation is in good standing and advise the state of  Georgia of any changes to the corporation’s business address, names of officers or directors, capitalization, articles of incorporation or bylaws.

Hope this helps and here's to a great small (or large) business growth day.