Your Business Deserves To Thrive

Was Your Company Properly Formed? Do You Have Hidden Liability Risks?

On Behalf of | Jun 2, 2017 | LLC, Personal Liability

R. Shawn McBride recently spoke about protecting you from liability. Here is the transcript:

Hi folks, it’s Shawn here with you asking a tough question. Is your company giving you the liability protection that you think it is? Unfortunately, for a lot of people, the answer is no. So we’ve talked a little bit in our blogs if you go to and, we’ve talked a bit about liability protection. And obviously that’s one of the primary reasons a lot of people form an LLC or a corporation is you wanna protect your assets. It makes perfect sense. You wanna separate your personal assets from your business assets.

Unfortunately, there’s a proliferation of online forms and sometimes the State makes it seem a little bit too easy. Most of us can just go out, fill up a form that we can get on the Secretary of State pages, send it in with a filing fee and you get something stamped back saying you’re an LLC. And a lot of business owners feel great comfort at this point. They’re like yes, I’m an LLC. Look, the State says so, I’ve got a signed, sealed document. Well, in some states, such as Delaware, if you read the law it’s pretty clear that not only do you need that LLC Agreement, but you need that Certificate of Formation that you filed with the State, but you need an LLC Agreement. So you need two documents and many people stop with one document.

Well, in the case of a corporation they might file the Certificate of Formation or Articles of Incorporation with the State, but they may not do the other litany of things that are necessary for a corporation. For a corporation to be fully formed properly under most state statutes, you’ve gotta take some additional steps.

They contemplate that you’re going to have by-laws, so you need to enact by-laws. They contemplate that you’re gonna have shares issued to your stockholders, so you need to go through steps to issue those. And it’s not uncommon for me to have businesses, particularly corporations, but even LLCs come to me and they wanna take some additional action and they haven’t finished the formation of their company which causes two problems. Number one, they need to be finishing their formation in order to take legally valid action. But beyond that, they don’t have the liability protection, in many cases. If a court was really gonna test them, I’m afraid that many of these companies wouldn’t have the liability protection they thought they had. So it’s an all-lose.

You paid that filing fee and you’ve done that work with the State to file your company, but now you don’t have liability protection so what do you do? Well, you need to go back and look at your corporate records. If you only did filing with the State, you probably have more work to do. If you’re an LLC, you probably need to get an LLC Agreement in place. Make sure you follow that. You wanna get a good LLC Agreement, there are a lot of online forms. Make sure you get a right one, you may wanna go talk to a lawyer at this point because you want to make sure that LLC form that you have is appropriate for the situation and that you follow it.

If you have a corporation, you wanna look at the corporation statute in your state or get a lawyer to do so, and make sure you’re following all of the rules that are required to make you a fully-formed corporation. A lot of people miss out on getting the by-laws, the resolutions, and the organizer consent. A lot of paperwork goes into a corporation, a lot more generally than an LLC but you wanna make sure you have it right to protect you. I want business owners to have the liability protection that they think they have, and I want them to avoid issues before they happen.

So, if this is starting to ring a bell with you, check out our blog,,, and if it’s something that you know you really want to dive into, feel free to ring our office, send me an email, let’s talk. And I also do this for groups. I talk about these kind of issues and really socialize this stuff and get people thinking about laying that foundation. Part of The Three Laws of Empowerment, which is my signature keynote, is talking about protecting. Getting an LLC or a corporation set up properly really is one of the first steps in protecting you. I want good things for you, I want people to be successful. So reach out, let me know how I can help you, and I look forward to talking to you soon.

Each case is unique.  Past results do not guarantee future outcomes. This posting is intended to be a tool to familiarize readers with some of the issues discussed herein.  This is not meant to be a comprehensive discussion and additional details should be discussed with your attorneys, accountants, consultants, bankers and other business planners who can provide advice for your circumstances. Each case is unique.  Past results do not guarantee future outcomes. This article should not be treated as legal advice to any person or entity. FreeImages Photographer C. We.

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