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Are You Starting A Business? Be Proactive In Limiting Personal Liability

Nov 29, 2019

When starting a business, being proactive in limiting personal liability can provide bountiful peace of mind as you navigate growth and success. In some cases, when business funds are tight, business owners can be held personally liable for the debt. Planning ahead protects your personal assets, as well as the company itself by speaking to a San Jose litigation lawyer.

State and federal laws can leave loopholes and make you vulnerable to individuals or other companies that might “pierce the corporate veil.” Meaning, if there is doubt of a separation between your company’s assets and personal assets, you can be held personally liable. Overall, these standard laws don’t protect you from specific circumstances. Protecting yourself from damages caused by employees or business activities is something business owners should proactively seek out.

A Litigation Lawyer Has A Four-Pronged Approach

In order to protect yourself adequately — from the least to greatest of worst-case scenarios — it is generally recommended to take the basic 4-pronged approach. This 4-pronged approach includes (1) following corporate formalities required by state law, (2) maintaining written documentation, (3) ensuring your business has sufficient capital to operate, and (4) keeping your business and personal finances separate.

1. Follow Corporate Formalities : Make sure your corporation is formed correctly and follows your state’s regulations for establishing and organizing a corporation. If these steps are not done appropriately, your corporation or LLC may be administratively dissolved, leaving you susceptible to personal liability. Failing to file the required paperwork and paying associated fees to the state makes everything involved in funding the organization vulnerable to personal liability. Nick Heimlich Law focuses on business formation.

2. Maintain Written Documentation : Alongside the initial documents to form your LLC or corporation, it is recommended to have an initial organizational meeting and maintain written documentation. All your corporate transactions need to be documented and accounted for in detail. As a matter of good business practice, the decisions you make daily should be documented and in compliance with your state’s law.

3. Capitalizing Your Corporation : Your corporation should start with enough money to cover the necessary expenses. If funding isn’t considered and appropriately allocated, you risk personal liability. For most businesses, necessary start-up expenses for essential equipment and other items can be drawn out in the very beginning. All companies have basic start-up expenses, necessary start-up equipment, and other items that can be recorded in written documents.Your company doesn’t need to have significant money in the bank. Still, if your company can be considered never to have had enough funds to operate on its own, a court can determine it was never intended to be a separate entity from you, opening you up to personal liability.

4. Keeping Funds Separate: Maintaining a strict separation between your business and personal finances is essential. If this separation isn’t done correctly, a court can determine your company is a sham. And like a sole proprietor, you become liable for the debts of the business. Therefore, if you’re funding your business with your personal expenses, make sure it is correctly allocated to the company. All expenses should be paid through business accounts. The corporate accounts should be separate and unlinked to your personal bank accounts.

Hire A Litigation Lawyer — Nick Heimlich Law Can Help

Make sure that each transaction made for your organization can easily be proven as having a business purpose and avoid alter ego liability. If a judge has trouble differentiating what are your personal assets from those that belong to the company, they can be more likely to pierce the corporate veil and hold you personally liable.

Again, the 4-pronged approach includes (1) correctly forming the business, (2) good record keeping, (3) reasonably funding your corporation, and (4) keeping funds separate. The best way to avoid personal liability — in the unfortunate case that your business’s activities result in litigation — is hiring a business litigation lawyer to assist in your business’ foundation. Nick Heimlich Law knows how to aid clients in ensuring they are protected from personal liability and your company from being undermined by claims of unfair competition.

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C O Lee Boyce Jr
C O Lee Boyce Jr
1708187295
Nick provided me sage advice with my issue. He was efficient, thoughtful, and good natured about the whole process.
David Duckworth
David Duckworth
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I recently received legal advice from Nick and he was very professional and easy to talk to. He gave us great advice and I would definitely use him again if needed. Thank you Nick!
Rebecca Bauer
Rebecca Bauer
1695770332
Nick was excellent! Very knowledgeable, asks great questions, and quickly understood the situation and was able to give great advice. I so appreciated his time, insight, and expertise in assisting with our situation. Highly recommend!
Charles Chen
Charles Chen
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Mr. Heimlich has been very responsive to my case and provided extraordinarily useful advice. Thank you!
Mario Cassara
Mario Cassara
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Nick Heimlich was very professional and knowledgeable in my case. He left a lot of the worrisome I had in my case to the expert and was very good at what he does. I will recommend Nick to anyone who needs council!Much appreciative,Mario
Taryn Harada
Taryn Harada
1682283989
This was the first time ever needing a lawyer for something, I was a bit frantic and overwhelmed with everything going on, but Nick and his team were very professional and honest, and made me feel at ease about my case. They were even professional and cool with the opposing attorney even though she was being unprofessional at times. In the end, they were able to settle my case and bring me a satisfying outcome. If you're ever in a bind and need a business lawyer, I highly recommend Nick and his team.
Jay Kamdar
Jay Kamdar
1677112007
I am an officer at a company that provides B2B Demand Generation services to marketing and sales. Over a number of years, I've worked with Nick Heimlich for legal services. He has advised me well and helped to represent the company in multiple legal disputes including in Court. I am very satisfied with his work and highly recommend him.
Rami Gideoni
Rami Gideoni
1671573652
I needed some legal consultation and per recommendation I received, I have approached Nicholas. He got back to me quickly and provided great service, he was patient, professional and knowledgeable. His advise is much appreciated, it cleared the situation, draw the next steps to follow and placed my mind to peace .I would definitely recommend his service.
I A
I A
1668466596
Nick answered all of my questions with direct and concise answers to my situation. Thank you!
Abe Honest
Abe Honest
1659056852
Mr Heimlich was very professional kind and knowledgeable when I give him a call. I was calling to hire an attorney for an tenant and landlord dispute. I had a particular issue that Mr Heimlich took time to completely listen to me. unfortunately the area I needed help was not an area that Mr Nick practiced. but he was not hesitant to give me some leads and direct me to the right place. he's a man of character and cares about what he does, I can only imagine his level of excellence in his area of expertise. he's a man of great character and I would recommend him for anyone to give him a call and talk to him. thank you very much Nick. thank you for caring .
Tilo S
Tilo S
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Nick was very helpful when I needed legal advice.Thank you!
Bay Small Moves
Bay Small Moves
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M C
M C
1567630884
I entered into a membership contract that had unreasonable cancellation requirements. I went to Nick through my company’s employee assistance program. Nick did thorough research and found that the contract term exceeded term limits allowed by California law. As a result, I was able to cancel the contract without any penalty. I was very satisfied with the outcome.
Brandon Lowry
Brandon Lowry
1560660818
Great attorney who listens to what you say and provides insight and guidance for your problem. Nick is extremely patient and will fight hard for you. He will also tell you the truth whether you have a case or not so you do not waste your money. Hard to find honesty nowadays.
Andyn79 Nguyen
Andyn79 Nguyen
1559407271
He wasn't able to take me as a client but had about 10 mins so he told me tell me and just from that i was able to be clear and did win from really dishonest people. So i am thank you telling the truth gets it's own reward
Mark Brown
Mark Brown
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Nick was very helpful when I needed assistance dissolving an LLC. Not only did he create the appropriate documentation, but he educated me on the process. His guidance was invaluable, and everything resolved smoothly. I would certainly use his services again in the future.
Bonnie Nevitt
Bonnie Nevitt
1477002289
My family cannot thank Nick enough. We needed a business litigation attorney for a lawsuit that was going to trial, he not only took the time to understand the complexities of the case but was able to convey that to the judge. He was able to get us amazing results. Hands down the best attorney we have ever worked with.
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