Corporation, Limited Liability Company, and Other Entity Formations

The foremost reason for the creation of a corporation, a limited liability company, or another entity, is to protect the individual(s) involved from potential personal liability.

Proper formation of entities requires not only payment of filing fees, but also, the attendance at, and conduct of, various members', stockholders', and board of directors' meetings. These meetings, which necessarily include the enactment of by-laws or the creation of an operating agreement, must be formal and documented. Failure to so act can result in the loss of protection from personal liability. A creditor could seek to "pierce the veil" of the corporate or limited liability entity by establishing that individual(s) did not act as an entity but, instead, merely acted as an individual(s), or a group of individuals. Such creditor action could result in personal liability for the individual(s) involved.

Our firm has always counseled our clients to take the additional steps, and to establish an initial entity record, which will document the formal existence of, and operation of the entity.