There are certain habits that you could develop that could cause you to risk losing all of the protections afforded by incorporating in the first place. When you decided to incorporate, you did so in part to set your personal assets aside from those of the corporation in the case of a lawsuit. You also did so to keep yourself separate from the liabilities of the corporation.
If you are piercing that veil in your daily practices, then you are risking the eventuality of a court piercing the veil later and holding you liable for the corporation’s debts, or attacking your personal assets in the case of a suit against the corporation.
Several factors could be understood as a veil piercing:
Lack of Corporate Formalities: File annual reports with the state. Maintain minutes of shareholder meetings. Keep adequate financial records.
Commingling of Assets: Never use corporate money to pay personal debts such as a credit card or mortgage payments. Never deposit customers’ checks into your personal account. Your corporation is a separate legal entity from you: Treat is as such.
No Corporate Assets: Make sure that your corporation is adequately capitalized, especially when corporate debt is incurred. Courts might look at the corporation’s debt-to-equity ratio and cash flow figures.
Insufficient Oversight: Take part in the daily operations of the corporation so that it is not mistaken as an alter ego of yourself.
Eckhardt Accounting can help you to make sure that you stay safe! Call us at 386-232-8321.