Burnaby49 wrote: ↑Sat Oct 23, 2021 6:18 pm
longdog wrote: ↑Sat Oct 23, 2021 11:00 am
hucknallred wrote: ↑Fri Oct 22, 2021 10:10 pm
Registering as a Ltd. company has benefits, the main one being protection of personal assets should you get in a bit of financial bother.
More in theory than in practice for us mere mortals unfortunately. Limited liability is all fine and dandy but if you start a new business as a limited liability company you are probably going to be asked for personal guarantees before anybody will extend any significant line of credit.
That was always my experience from 35 years as a tax auditor reviewing small companies. It was standard practice for financial institutions to require that small corporation owners personally guaranteed company loans.
That is true for liability for loans and other debts owed by the company. Of course, incorporating technically DOES shield the owners assets. That is why most lenders will insist that the owner pledge his/her personal assets. If the owner has enough cash to start the business and operate it without availing himself of credit, he remains protected.
But is it true for liability due to lawsuits? Imagine that the owner operates the business properly and does not comingle personal/private funds by paying personal debts with company money, but is sued by a client/customer for some sort of malpractice. For example, say one is a contractor, building a home for a client, and the client is injured on the jobsite while inspecting the progress of his new home. The client sues the contractor and wins a judgement in court that exceeds the company's assets. In such a case, can the client go after the contractor's personal assets to fulfill the judgement?
I realize that, if there is fraud involved (real fraud, not crabby's definition of fraud), then the phrase used in the US is "piercing the corporate veil". In my scenario, I am presuming that there is no fraud or other mishandling of the company.
I know that the lawyers here are probably going to answer "it depends".