Bloomberg Anywhere Remote Login Bloomberg Terminal Demo Request


Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world.


Financial Products

Enterprise Products


Customer Support

  • Americas

    +1 212 318 2000

  • Europe, Middle East, & Africa

    +44 20 7330 7500

  • Asia Pacific

    +65 6212 1000


Industry Products

Media Services

Follow Us

Bloomberg Customers

False Security About Assets

Posted by: Rod Kurtz on January 9, 2006

Don’t assume that forming an LLC or corporation will always shield your personal assets. Even if you operate as a corporation or LLC, a creditor can still go after your personal assets if:

1. You personally guarantee a loan or lease. Since many lenders and landlords condition small-business loans and leases upon the business owner’s personal guarantee, the only way you could escape these debts is for the business and each owner seeking protection to file for bankruptcy.

2. You fail to pay federal or state taxes. If your business does not pay income, payroll, or other taxes, the IRS or the state tax agency can try to recover the unpaid taxes from you personally or from the other directors, officers, and owners of your LLC or corporation.

3. You act in a negligent matter. If you run a business subject to potential negligence claims — for example, an establishment open to the public or a manufacturer of consumer products — you can be personally liable for the damage. In these cases, buying insurance will usually do you more good than forming a corporation or LLC.

4. You fail to abide by corporate rules. If you don’t take corporate responsibilities seriously — for example, if you mix corporate and personal funds and don’t keep records of meetings and shareholders — a judge may strip away the asset-protection feature of the corporation or LLC. It’s called “piercing the veil.”

Richard Stim
Author, Whoops I’m in Business: A Crash Course in Business Basics
San Francisco

Reader Comments


January 19, 2006 7:55 AM

Thank you for the advice! Wish we would have read this earlier! We were under the belief that forming a corporation would protect us from personal liability and now we are learning otherwise.

Post a comment



Want to improve the way you run your business? Entrepreneurs, academics, and consultants from diverse industries offer practical advice on a variety of topics each business day.

To submit a tip for consideration, first check our archive of previous tips to make sure you're not repeating a tip someone has already contributed. Then send the tip to Small Business channel contributor Michelle Dammon Loyalka. Because of the volume of material she receives, she may not respond to each individual.

BW Mall - Sponsored Links

Buy a link now!