n the midst of economic recession, many Americans have had personal belonging repossessed. But business incorporation shields entrepreneurs from this threat when it comes to corporate matters.
VirginaBusiness.com describes two court cases that illustrate how the corporate veil helps business owners protect their personal property.
In one case, a business founder sold a home owned by his corporation to a family, only for the family to later discover the house had some extremely costly defects. The source says the family tried to sue the selling agent – or the business founder. They were unsuccessful because the court said the corporation, and not the businessman, was the seller. They refused to impose any personal liability on him.
In a similar case, a shareholder for Lake Motel was also free from personal liability in the instance of an improper corporate sale of property. The court ruled in favor of the shareholder saying the small business was responsible.
Good business practice is always encouraged. Still, as these two trials demonstrate, when transactions go bad, business incorporation can protect an entrepreneur from personal liability.