Any business that chooses to operate as a corporation, no matter how small, must comply with ongoing state law based requirements. For this reason, many small businesses choose to operate as limited liability companies, which are generally subject to minimal statutory requirements. Some states, such as Wyoming, have close corporation statutes that relax many of the formalities normally applicable to corporations. The majority of states do not have close corporation statutes, although close corporations, in the generic sense, may be formed under their general corporation statutes.

Piercing the veil is an important concept for any business planning attorney to understand. Piercing the veil originated in the corporate context, but has been increasingly used by courts to hold members of limited liability company (LLCs) liable for the entity’s debts. What does it mean to pierce an entity’s veil, and what we can do to protect our clients from the risk of this occurring?

One of a small business owner’s primary goals is frequently asset protection. Small business owners are often wisely counseled not to “get into bed” with a potential business partner without conducting proper due diligence. The financial consequences should there be a fall-out in the business relationship or failure of the business could be devastating.