You’re Damned if You Think that Your Private Corporation Is a Person.

Posted: December 13, 2012 in Business Contracts, Corporate Formalities

With apologies to Mitt Romney, corporations are not people.  Neither are LLC’s, Limited Liability Companies. That’s true for giant, publicly traded companies.  It’s equally true for your small or mid-sized business, even if you are a 100% owner.  I think that what Romney should have said is that corporations are made up of people.  They are owned by people.  They are operated by people.  People sit on the boards of directors.  People work at corporations.  In fact, corporations can only take action through people, their officers, employees, agents, etc.

But business entities are not people.  You don’t want them to be.  Do not think of your company as your alter ego.  This kind of thinking can get you in trouble.  The reason that you filed incorporation papers in the first place was to limit your personal liability.  While even that is not foolproof, do not undue your good business decision to incorporate by treating your business like your alter ego.

It should go without stating that you should not use your business accounts to pay your personal debts.  But I want you to go further and to stop thinking of your company as you, and you as your company (unless you are truly a sole proprietorship).  Do not think or say “me” when you really mean “Me, Inc.”.  As a business litigator, I see this all the time – in contractual dealings, in depositions and in court.  Don’t do it.  Get out of the mindset that your company is you and that you are your company.  While you may be the face of your company, don’t unwittingly expose yourself to personal liability by allowing people to think that you and your company are one in the same.

When you sign a contract for your company, be clear that it is a company contract, and that you are signing “as President,” or whatever your title is.  I’ve blogged about these issues before:

https://damnedif.com/2011/03/15/youre-damned-if-you-dont-respect-corporate-formalities/

If you need helping separating yourself from your business to avoid personal liability, give me a call at 617.338.7000.

By Adam P. Whitney

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