The Legal Column: The Risky Side of Incorporation

Ask the typical small-business owner to name the main advantage of being incorporated, and the answer will probably be “limited liability” —the unique ability of a corporation to shelter a business owner’s personal assets from liabilities arising from the sometimes risky business of doing business. Unfortunately, this typical owner might be in for a rude awakening when the company is sued. The corporation that was going to provide protection might be disregarded by the court, and the owner held liable for the debt. You Must Play by the Rules A corporation provides limited liability because, in the eyes of the law, it exists as a separate “person.” This fictitious person, however, lives and breathes only if you play by the rules. A