One of the main advantages of corporations and limited liability entities is the corporate shield against personal liability for the acts and omissions of the corporation. Here is a list of things people have done to lose that protection.
1
Hide the Corporation
You bear the burden of proving your creditors knew they were dealing with a corporation. If your creditors and customers don't know you are doing business as a corporation, they are entitled to sue you, individually, when things go wrong. Since a corporation must have a lawyer represent it in court, why not save money on legal fees. You can also save money on corporate dress. Instead of wasting ink using the full corporate name "The Patsy Pasta and Noodle Company, Inc," print business cards and letterhead at all with a nice logo and the abbreviation Patsy.
Of course, its even more efficient not to use cards and letterhead at all. Oral contracts are great. Even if you forget to hide your corporate status, creditors will say you never told them. Go Patsy.
2
Use Other People's Money
This is a great idea. Why not fund Patsy Noodle and Pasta with subordinated loans from business acquaintances. This works even better if Patsy's Pasta Bowl, LLC, a company formed with 100 dollars and a patent pending is the sole shareholder and a preferred creditor of the new business. Pasta Bowls management contract for Patsy Noodle and Pasta is a preferred creditor to the subordinated lenders.
In Wisconsin, this is a twofer. Those lenders can pierce the corporate shield whenever the company does not start with reasonably adequate capital to accomplish its business plan. Patsy's Pasta Bowl is liable because failed to properly capitalize Patsy Noodles and Pasta. Patsy is liable because the holding company is under capitalized, too.
3
Do Everything Yourself
Like any good entrepreneur, Patsy is a perfectionist and somewhat obsessive about control. Patsy personally shovels the sidewalk in winter. No one else can do it right. That's great, because Mr. Slipenfahl can sue Patsy for his/her personal negligence if failing to keep the sidewalk clear.
This is the great thing about one person service corporations. They don't protect what the owner does or fails to do himself.
The only problem with this technique is that creditors cannot sue Patsy personally, unless Patsy also uses the strategy in Step 4.
4
Draw First and Last
Short of cash? Patsy just writes company checks to pay personal creditors. It doesn't hurt anyone, because the Patsy Pasta Bowl and Patsy Noodle and Pasta are just an alter egos for Patsy. It's all Patsy's money in the end..
Except that when an individual or a small group controls the corporation so that it has no real separate existence, the corporate veil vanishes in a puff of smoke.
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