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Client Quotes" Ambridge Law offered very professional service and legal advice. They listened to my problems and earned my trust and respect "A. J., Richmond Hill, ON
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 Business Law FAQ
What type of business should I set up?
For many people, the best initial choice is a sole proprietorship or a partnership, because these are relatively easy and inexpensive to setup, and they are also relatively easy to maintain. But if business liability is a concern, a corporation or limited liability company may be more attractive to you, as they generally provide you with more protection against personal liability. For more information please contact Ambridge Law. Please Contact Us to discuss your legal issues.
How can I protect myself from liability?
Liability is a major concern for many business owners, especially for larger business which have a lot of risk. The cause for concern is that without some type of protection, you can be personally liable for your business’ debts and losses as a business owner. To help protect yourself from such liability, you can choose to organize your business as a corporation or limited partnerships (are also an option, although they will not help you if you are going to be actively involved in running the business). You should make sure that you set your corporation properly, in accordance with the relevant laws, and work to keep your company in good standing. Please Contact Us to discuss your legal issues. We look forward to working with you.
What are the possible consequences of personal liability for business debts and obligations?
Personal liability can devastate the accumulated wealth of a lifetime of work. This form of liability opens the individual to claims for a wide range of business obligations. Most people realize that personal liability may extend to business losses, but other obligations may also reach individuals, including:
- Damage awards in lawsuits;
- Tax deficiencies and penalties; and
- Back wages and benefit payments.
Example: Wendy operates a trucking company as a sole proprietor. One of her drivers causes an accident that kills several people. If the company's insurance and assets are inadequate to cover the damages awarded in the wrongful death suit, the plaintiffs may enforce the judgment against Wendy's personal assets.
Limited liability offered by incorporation shelters business owners from personal liability. Certain types of insurance can also help cover business owners, directors, and officers. However, if an owner or director performs certain personal acts, behaves illegally, or fails to uphold statutory requirements for corporate status, he or she may face personal liability despite the corporate shelter.
What is "piercing the corporate veil?"
Sometimes, courts will allow plaintiffs to receive compensation from corporate officers, directors, or shareholders for damages rather than limiting recovery to corporate resources. This procedure avoids the usual corporate immunity for organizational wrongdoing, and may be imposed in a variety of situations. The specific criteria for piercing the corporate veil vary somewhat from state to state and may include the following:
- If a business is indistinguishable from its owners in practical terms, courts will not allow owners to benefit from limited liability.
Example: Fred's Tractors and Fred share the same banking account. Fred signs business contracts in his own name. Fred may be liable for breaching a business contract because he and his company are legally indistinct.
- If a corporation is formed for fraudulent purposes, courts will allow recourse to the owners.
- If a business fails to follow corporate formalities in areas such as record-keeping and decision-making procedures, a court may impose liability on the individuals controlling the business.
The potential for personal liability encourages businesses to observe legal requirements and to avoid damage to third parties.
Please Contact Us to discuss your legal issues. We look forward to working with you.
Click here to contact us regarding your legal matter. (416) 590-1777 |
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