Tag Archives | Small companies

Business Plan Basics

Taking the time to put together a solid business plan that includes your plans, strategies and goals for your business can make the difference between the success or failure of your company.  In fact, according to Dun & Bradstreet statistics, poor planning is the number one cause for failure of small businesses.

Your business plan should give a meaningful description of your business.  Think of it as a tool to help grow your company, and to monitor your company’s performance over time.  In addition, investors will typically want to review your business plan to determine whether to invest in your company.

Don’t worry that you can’t foresee every twist or turn your business will take, and be prepared to modify your business plan as you go along.  Do, however, be realistic in the assumptions you make while drafting your business plan.  Your business plan conveys a lot about both you and your business, so make sure you approve of the message it sends.

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Piercing The Corporate Veil

One of the most attractive features of a corporate structure is limiting the personal liabity of the company’s shareholders (or members in a limited liability company).  But simply incorporating your business is not enough; it does not automatically protect you from your company’s creditors.

Generally a corporation’s creditors can’t sue its shareholders for their personal assets (limitied liability). However, in certain instances courts will allow the creditors to pierce the corporate veil and do exactly that.  For example, courts sometimes allow piercing the corporate veil in instances of fraud or similar wrongdoing, not allowing the shareholder to hide behind a false or flimsy corporate veil.

It is important to adhere to corporate formalities, and treat the corporation as a separate entity.  (You and the corporation are NOT one and the same.)  Properly document transactions between the corporation and its shareholders, officers and directors, and make sure the transactions are fair and reasonable and in accordance with applicable corporate law.

Though piercing the corporate veil is not terribly common, it is important to protect yourself against even the possibility of losing your limited liability.

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