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How to Avoid Personal Liability and Protect Your Business from Creditor attempts to Pierce the Corporate Veil

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    There are countless issues to consider and plan for when starting a new company – particularly here in the state of California, where businesses are regulated aggressively. Among the innumerable tasks and to-dos for any new business owner, entity selection is one of the most crucial. Depending on whether the owner or owners choose to structure the business as a corporation, a partnership, a sole proprietorship, or a limited liability company (LLC), the business will face different challenges and restrictions, such as the maximum number of shareholders permissible, whether the entity will be subject to double-taxation, and – as our business tax lawyers will discuss in this article – the extent to which individual directors, members, or shareholders assume personal liability for the business’ unpaid debts to creditors. Though some structures, notably the corporation and LLC, generally afford greater protection from exposing one’s personal assets to liability, there can arise exceptional circumstances under which this protection disappears – a scenario referred to as “piercing the corporate veil.” Fortunately for business owners, there are tips and strategies to reduce the risk that this could occur. Our business entity selection attorneys have compiled just a few of them here.

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