In this age of information, most small business owners understand they need the protection provided by a corporation or limited liability company. Such protection, however, can be lost though certain actions.
Criminal Action
Creating a business entity only protects a business and shareholders from civil liability. Civil liability arises from a body of state and federal law that allows for compensation for alleged wrongs. These wrongs can arise in the form of negligence, contractual breach and so on. If an entity is found civilly liable, it must pay compensation, but no jail time is involved.
Neither a corporation, limited liability company nor any other entity will protect anyone from criminal liability. Claims to the contrary published on various web sites are simply wrong. A person forming a corporation to front for a ponzi scheme or scam to defraud consumers is going to receive no protection from criminal prosecution. If you have any doubts on this issue, simply consider the recent criminal convictions of the Tyco and Enron executives.
Standing Apart
Both corporations and limited liability companies are considered to stand apart from their...
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