Personal Liability Protection Tip for Business Owners: Sign on Behalf of the Entity
Shielding Business Owners: The Key to Personal Liability Protection
Running a successful venture involves safeguarding personal assets. This post explores a pro tip that may make a difference – signing contracts and obligations exclusively on behalf of the entity. Doing so can help business owners protect themselves personally from potential business liabilities.
The Power of the Separate Entity
Treating the business as a distinct legal entity is important to personal asset protection. For instance, imagine a startup founder who forms her business entity as an LLC. By treating the business entity separately, it will help to safeguard the business owner’s personal assets and limit her personal liability. Even if the business faces debts or lawsuits, the founder’s personal savings and property may generally remain protected.
Proper Contract Signatures – Sign for the Entity
Using the entity’s name and the signer’s official title when signing contracts is important to help to avoid unintended personal liability. Consider a scenario where a business owner signs an agreement for his company using solely his individual name. In the event of an alleged breach of the agreement, the other side could try to say that the business owner be held personally liable for the agreement obligations, potentially jeopardizing the business owner’s personal assets as compared to just the business’s assets.
Also Apply This to Marketing Materials
Marketing materials should keep clear the separation between the individual and the entity. For example, a small business owner should ensure her company’s logo and designated title, where applicable, are on business cards and letterhead, and on other materials. Doing so helps make it clear that third parties are engaging with the entity and not with the businessperson personally.
An Example of the Ways to Help with Personal Liability Protection
A major benefit of operating a business under an entity like a corporation or limited liability company is personal asset protection. By signing on behalf of the entity, entrepreneurs and businesspersons can clarify the separation between themselves and their businesses.
This tip is an example of ways that help business owners avoid personal liability for the obligations of the business. Click here to contact Guala Law Firm if you need legal advice or assistance.
