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The Corporate Advantage By
David Day |
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Those who form corporations are afforded superior lawsuit protection by
virtue of the fact that the corporation is considered to be an
"individual" in its own right, with the same rights, duties, and
obligations as any individual. As a result, the corporation can sue and be
sued. In order to preserve this legal separation between the corporation and
its owners, officer, and directors, it is necessary to comply with all the
requirements in running the corporation. The corporation must be properly set
up with the adoption of corporate bylaws, the issue of corporate stock, the
transfer of assets to the corporation, taking out the proper state and local
licenses in the corporate name, and serving notice that the business is
operating as a corporation.
While a corporation can help with certain types of claims, an officer,
director or employee cannot escape liability for certain wrongs which they
individually do to others. For instance, a driver of a car owned by a
corporation cannot escape individual liability for an accident simply by
claiming that the corporation owned the car. The negligent driver may still
be liable.
Officers, directors, and other corporate personnel who use the corporation to
purchase business assets for personal use run the risk of having their
corporate veil pierced by creditors–meaning, losing the benefits of having a
corporation-- arguing that a valid corporation does not exist. In my
experience, if someone wants to have the benefits and protection that come
from forming a corporation, the rules have to be followed. |
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