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Donna Lim

How to Maintain Liability Protection for Your Corporation


When you started your business, you may have formed a corporation to protect your personal assets from lawsuits against your company. However, you must also operate your business like a corporation — or risk losing the liability protection you expect to have.

The corporation’s name should appear on company letterhead, checks, and invoices. Contracts should be made in the corporation’s name, not yours or another individual’s name. No matter how long you’ve been in business, always treat your corporation as a separate legal entity.


Avoid mixing your personal affairs and your corporation’s business. Maintain separate bank accounts and credit cards and keep careful records of corporate transactions. File tax returns and pay any corporate taxes due on time.

Meet and Document

Hold shareholder and director meetings according to a regular schedule and keep official minutes of those meetings. Corporate minutes provide documentation of key financial and legal decisions, such as:

  • Authorization for a substantial loan to or from the corporation

  • Adoption of a retirement plan or approval to make a contribution to an existing plan (e.g., a profit sharing contribution)

  •  Issuance of stock

  •  Purchase of real property or approval of a long-term lease


By observing the formalities, you can protect yourself and have the records you may need if the IRS, a creditor, or a company insider challenges critical decisions that were made.

Don’t get left behind. Contact us today to discover how we can help you keep your business on the right track. Don’t wait, give us a call today.

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