Protecting Your Personal Finances from Business Liabilities

 Posted on November 29,2022 in Business Law

While it is exciting to start your own company, the business structure you choose for that company can be critical to your financial future. One of the most popular choices is a limited liability company (LLC). One of the goals of forming an LLC is to prevent any personal liability or financial responsibility for any debts or other issues the company incurs. Although in most cases, an LLC will provide those protections, there may be situations where the owner of the company could face personal liability. A business attorney can explain some steps to take to avoid these types of issues.

Keeping Personal and Business Finances Separate

It is critical to keep your finances separate. Commingling business and personal assets can result in the owner facing personal liability for business debts, even though the business is an LLC. Mixing funds could give the legal impression that the business is not really a separate entity. There should be a bank account(s) for the business, set up in the legal name of the business, and a separate bank account(s) for personal funds.

All companies have some amount of operating expenses. Owners should always make sure there are enough funds to pay those expenses. This also means the owner should not withdraw funds from the business account in order to pay personal expenses.

Conversely, the owner should not tap into their personal accounts to cover business expenses. If this does become necessary, it is important to structure these funds as loans in order to avoid the appearance of commingling.

Keeping Personal and Business Issues Separate

It is also important to avoid a commingling of activities. If an owner is conducting official business on behalf of the company, they must make it clear to the client that they are acting in their official business capacity. Any transaction that takes place must take place in the company name, not the owner’s name. This includes contracts, loan applications, purchase orders, vendor agreements, and more.

Keeping these two entities separate also includes how credit cards are used. Personal credit cards should not be used for business transactions and business credit cards should not be used to purchase items for personal use.

Contact a Fort Lauderdale, FL Business Lawyer

If you are forming your own business, make sure you will be fully protected in both your business and personal lives. Call The Elliot Legal Group, P.A. at 754-332-2101 to schedule a confidential consultation with a skilled Broward County business attorney to find out all of your options.

Source:

https://www.nextinsurance.com/blog/does-llc-protect-your-business/