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Separation
When couples are not ready for divorce or they are waiting to take that final step, there are still financial questions that need to be addressed. If one person is living in the home, who is paying the mortgage? If there are car payments or credit card debt, who is responsible for handling them? Sometimes couples can work these things out amicably as they wait to see where the relationship is heading. Other times, a family law attorney will need to be involved to make sure that all money issues are handled during the separation.
If the couple chooses to get back together and work things out, the separation's financial arrangement is no longer necessary. If things progress and there is no way to save the marriage, more drastic measures need to be taken. In this case, both the husband and wife along with the children need to be financially taken care of in some way.
Divorce, Alimony, and Child Support
Divorce is not just dissolving a relationship. It is also changing the way that a couple handles their finances. A family law attorney can help to establish how the money should be divided between the two individuals. While some states adhere to a 50/50 policy, most of the time the situation is not that easily resolved. One person may be entitled to spousal support, also known as alimony.
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Incorporating your business can be a great idea. An incorporated business may appear more established than a sole proprietorship, and it can be easier to attract funding to a corporation. Additionally, a corporation can last forever (`in perpetuity`) and corporate stocks (ownership documents) can be bequeathed in your estate. A partnership or sole proprietorship, in contract, will die with any owner, unless special steps are taken.
The biggest reason, though, that people choose to incorporate is to protect themselves personally from liability for their business activities. Unfortunately, that's not always a perfect fix.
If you are doing business in your own name, or in another name but without the benefit of a corporate structure, the important thing to remember is that you are the business. That means if the business owes money, goes bankrupt, or is the subject of a lawsuit, the owner is responsible for financial obligations.
A corporation, on the other hand, is a "person" under common law, which means it can sue and be sued on its own, and if the corporation is bankrupt or subject of a lawsuit, the corporation itself, NOT the owner(s), is responsible to pay the bills.
So what's the downside? First, corporations typically require fees, ongoing documentation, and even have to file their own tax return. If the owner fails to meet these requirements, the corporation may fail to provide liability protection.
It's called "piercing the veil". A business owner who fails to meet documentation requirements may find their corporation is not strong enough to protect them from personal liability. In the event of a legal action, the court that "pierces the veil" essentially determines that the shield of corporate structure has been neglected to the point where it is no longer a valid protection.
Key points:
Incorporation: the Advantages
Makes the business appear more established
May improve funding opportunities
Lasts in perpetuity
Owners (called stockholders or shareholders) are not liable for business losses
Incorporation: the Disadvantages
Higher administrative expenses
Extensive ongoing documentation requirements
Piercing the Veil: if your corporation does not follow basic corporate documentation requirements, and is subject to a lawsuit or bankruptcy proceeding, the court may elect to `pierce the veil`of the corporation and go after the owner(s) for reimbursement for business obligations.
The upshot? Do your due diligence. If you incorporate your business, talk to a lawyer, or carefully review the requirements and be sure you remain up to date. It's the best way to keep that `veil`strong and healthy!
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