One of the main reasons prompting a client to establish a business entity such as a North Carolina limited liability company or corporation is to limit liability from the business and protect his or her personal assets. As a general rule, business owners are not personally liable for company debts and obligations. However, if the company is not properly formed and maintained or if the business structure is abused, that protection may fail. When this happens, lawyers say that the “corporate veil” or “corporate shield” has been “pierced.” As a consequence, the business owner becomes personally responsible for the company’s debts.

To minimize the possibility of having its corporate veil pierced, a business owner can take several steps. One step that is often neglected is observing proper corporate formalities. Some examples of corporate formalities that a business owner would be wise to employ are as follows:

  • Establish a company bank account and avoid commingling company funds with his or her personal funds
  • Maintain complete and up-to-date company records
  • Hold periodic meetings, especially annual meetings, and keep a detailed record of the minutes
  • Put major company actions to a vote and keep a record of the results
  • Operate properly through directors and officers, members and managers, etc.
  • List the company name on all contracts, leases, and other documents

If you would like to schedule an audit of your company’s legal records or discuss the steps that you can take to minimize the risk of a veil-piercing claim, please do not hesitate to contact us today at (704) 887-4944 or

Starrett Law Firm is a Ballantyne law firm focusing on estate planning, probate, and business law. We prepare clients across Charlotte to leave a lasting legacy. For more information about the firm, please visit our website at

Print Friendly, PDF & Email