Many advertisements on the Internet tout the benefits of forming a corporation. The first benefit typically mentioned is that a corporation provides "limited libility". Many of these companies would have you believe that if you form your own company for $99.00 you can magically protect your assets from creditors. But asset protection is more than that. It is true that limited liability is a major reason for incorporting your business. The overlooked issue by many of these online companies is that filing the articles of incorporation is only the very beginning in protecting your assets.
The basic concept of a corporation is that a creditor will not get to the shareholder’s assets unless there is a reason to "pierce the corporate veil". One reason for piercing the corporate veil is the failure to follow corporate formalities. This may include the failure to hold shareholder and director meetings, documenting those meetings with corporate minutes, segregating corporate funds from personal funds and the failure to sign documents as a corporate officer. Managing your small business corporate governance is a key factor in maintaining your corporate limited liability.
If you are interested in learning more about asset protection you may want to check out the Asset Protection Blog.