Anthem Law

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  • By: Samuel T. Crump, Sr.
  • Published: June 21, 2017

Setting Up Your Business: At Anthem Law we have helped thousands set up their business in the form of a limited liability company or a corporation. The reason one should operate a business as an LLC or corporation is to protect your personal assets from the liabilities of the business. If you don’t form a legal entity and you conduct business as one person you are a sole proprietorship; if you conduct business with two or more people as owners, you are probably a partnership or some other informal entity. But all of your personal assets will be exposed to the liabilities of the business, such as breach of contract, personal injury, etc. Whether an LLC or a corporation is better is beyond the scope of this email, but we find an LLC serves the purposes of most small businesses and they are much easier to create and maintain. In the remainder of this email we will refer to an LLC, but most of the points also apply to corporations.

Keep Your Business Separate From Personal Activities: The first important thing to remember about your business is to keep your finances and other business activities separate from your personal finances and activities. Too many people get sloppy and co-mingle their checking account and even their personal property such as furniture and equipment. Your LLC is its own legal entity and needs to have its own banking accounts and own its own property. Not only does co-mingling create headaches for your tax professional, it causes problems if the business is ever dissolved and assets and debts need to be divided. Most importantly, however, are the issues of “alter ego” and “piercing the corporate veil”. This is when something bad happens and your LLC is being sued. The plaintiff may allege that you have not operated your LLC as a separate entity; instead, they allege your LLC has become your alter ego, and they attempt to reach your personal assets as part of the lawsuit. In other words, they ask the court to “pierce the corporate veil” of protection you tried to set up, and let them sue you for your personal assets. Again, this is why you want to keep your LLC separate from your personal affairs.

Keep Formal Records of Actions: Another important function when operating your LLC is to keep proper records of the important actions you take. Whether you are a single member LLC or you have lots of members (aka “owners”), you should record things like buying company vehicles or buildings; approving the expenditure of unusually large sums of money; entering into major contracts, etc. These should be recorded in a simple document called an “Action in Writing” that simply describes what action is being taken and the vote of the members to approve the action. Then everybody signs the Action in Writing and it is kept with your important documents. This simple step avoids all sorts of disagreements and legal actions later on when memories become cloudy. It is also another good step in proving to a court that your business is separate from your personal affairs.

Stay on Top of Government Filings: Filing paperwork with the government can be complicated. Fortunately, Arizona filings are easier than many other states. These filings are definitely required when you create your business, but they can also be required later on. For example, a change in your business address or statutory agent are the types of things that must be reported to government agencies. Annual filings (and government fees) are usually required for corporations, but often they are not required for LLCs. And if you start doing business in another state, you will certainly need to file documents with that state’s government; this is a step many people overlook, which can be costly.

Seek Legal Advice Before Things Turn Ugly: It always amazes us how often people come for legal help after a dispute has spiraled out of control. It is much more difficult to help a client after the fact than before. Disputes can be internal, say between LLC members or with employees; or they can be external, perhaps with a customer or a vendor. Whatever the situation, if you sense a dispute coming up, we highly recommend getting legal advice on the best course of action. This can save you lots of headaches and thousands of dollars. So why don’t more people do this? Usually they believe the legal advice is going to be expensive. Trust us, it will be much more expensive when the dispute escalates. It helps if you have an existing relationship with an attorney before any problems arise. We often get calls from existing business clients that want to simply run something by us. Because we already know the business and the people involved, we are able to efficiently help those clients – sometimes with a simple phone call. On the other hand, when we are contacted by a new client, it is imperative that we meet with them to get all the background before we can give any advice.

If you have any questions on the above or any other legal matter, please contact us.


Sam Crump
Attorney at Law

About Anthem Law
Business – Family Law – Wills/Trusts – Probate – Personal Injury – Bankruptcy
The information provided is intended to give general information only and not to provide advice on specific legal issues. If you need our assistance interpreting any information, please feel free to contact us.

Samuel T. Crump, Sr.

Call For A Consultation
(623) 526-5597

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