{"id":1406,"date":"2024-02-05T16:54:07","date_gmt":"2024-02-05T21:54:07","guid":{"rendered":"https:\/\/www.harringtonlawassociates.com\/?p=1406"},"modified":"2024-02-08T16:25:24","modified_gmt":"2024-02-08T21:25:24","slug":"business-practices-limiting-personal-responsibility-part-iii","status":"publish","type":"post","link":"https:\/\/myhlaw.com\/es\/business-practices-limiting-personal-responsibility-part-iii\/","title":{"rendered":"BUSINESS: Limiting Personal Liability (Part III)"},"content":{"rendered":"<h3 style=\"text-align: justify;\"><u><\/u><strong>This is the\u00a0<\/strong><strong>final part<\/strong><strong> to our discussion aimed at helping owners and officers\u00a0<\/strong><a href=\"https:\/\/myhlaw.com\/business-practices-limiting-personal-liability-part-i\/\"><strong>avoid personal responsibility<\/strong><\/a><strong>\u00a0for the obligations and liabilities their companies take on in the course of doing business. \u00a0<\/strong><\/h3>\n<p style=\"text-align: justify;\"><strong>The\u00a0<\/strong><a href=\"https:\/\/myhlaw.com\/business-practices-limiting-personal-liability-part-i\/\"><strong>first part<\/strong><\/a><strong> of our series provides an overview of the key issues related to corporate liability. \u00a0The <\/strong><a href=\"https:\/\/myhlaw.com\/es\/business-practices-limiting-personal-responsibility-part-ii\/\"><strong>second part<\/strong><\/a><strong> focuses on what not to do. \u00a0Here, we get to the juicy part of the discussion: proactive techniques for guarding against personal responsibility.<\/strong><\/p>\n<h2 style=\"text-align: justify;\">\u00a0<strong><u>Choice of Jurisdiction (Domestic)<\/u><\/strong><\/h2>\n<p style=\"text-align: justify;\">If you live in Florida, where our firm is <a href=\"https:\/\/myhlaw.com\/locations\/\">headquartered<\/a>, then you may know about the Florida State Department&#8217;s website, commonly\u00a0referred to as \u00abSunbiz.\u00bb \u00a0As a corporate law firm, our attorneys spend a lot of time on the website, and it is certainly a very convenient &#8212; and transparent&#8211; site. \u00a0Whenever you want to know the owner(s), key officers, company address and registered agent of a Florida company, you can quickly and easily find the information at <a href=\"https:\/\/myhlaw.com\/locations\/\">sunbiz.org<\/a>. That is convenient for us, but not ideal for owners interested in limiting liability. \u00a0The first step to limiting personal liability is staying out of the public record.<\/p>\n<blockquote>\n<p style=\"text-align: justify;\"><strong><em>The Florida State Department&#8217;s website is extremely convenient, and extremely transparent &#8212; which may not be ideal for all business owners and officers<\/em>.<\/strong><\/p>\n<\/blockquote>\n<p style=\"text-align: justify;\">If you are doing business in Florida, you will need to have a company registered in Florida. That, however, is not to say you must have a \u00abFlorida company.\u00bb<\/p>\n<p><iframe title=\"Business: Business Owner Liability Protection | Harrington Legal Alliance | West Palm Beach, FL\" width=\"500\" height=\"281\" src=\"https:\/\/www.youtube.com\/embed\/oyvEdM6PfIU?feature=oembed\" frameborder=\"0\" allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share\" referrerpolicy=\"strict-origin-when-cross-origin\" allowfullscreen><\/iframe><\/p>\n<p style=\"text-align: justify;\">You can\u00a0<a href=\"https:\/\/myhla.wpengine.com\/areas-of-practice\/biz-intl\/company-formation-or-restructure\/\">form your company<\/a>\u00a0in a jurisdiction with more favorable corporate laws, such as <a href=\"http:\/\/www.corp.delaware.gov\/\">Delaware <\/a>or <a href=\"http:\/\/nvsos.gov\/index.aspx?page=4\">Nevada<\/a>. \u00a0In those states, essentially all information about the ownership and management of companies is shielded from the public. \u00a0In fact, in some states, the state government does not even have access to such information.<\/p>\n<p style=\"text-align: justify;\">Once your Delaware company is formed, you can register it with the Florida State Department. \u00a0It will be referred to as a \u00abforeign company registered to do business in Florida.\u00bb \u00a0By this means, you will have the anonymity of a Delaware (or Nevada) company while still being able to legally conduct business in Florida.<\/p>\n<p style=\"text-align: justify;\">In addition to the benefit of keeping your name out of the public record, you may also be able to avail yourself of the friendly owner\/officer laws in the foreign jurisdiction. \u00a0Fair warning here. \u00a0By registering your company in Florida, you are agreeing to be governed by Florida law. \u00a0Nonetheless, if your company is organized under the laws of a foreign jurisdiction, there are situations where you may be able to apply the more favorable laws instead of those of Florida.<\/p>\n<p style=\"text-align: center;\"><strong><a href=\"https:\/\/myhlaw.com\/es\/business-where-to-organize-your-company\/\">More on Where to Set Up Your Company<\/a><\/strong><\/p>\n<p style=\"text-align: justify;\">If you like the idea of shopping for a jurisdiction with laws and procedures that most benefit your situation then&#8211;in addition to Delaware and Nevada&#8211;consider Alaska, Wyoming, Montana, and South Dakota as well. \u00a0All of these states have made conscious decisions to pass legislation that will encourage companies to incorporate there, even if the companies actually conduct business in other states.<\/p>\n<h2 style=\"text-align: justify;\"><strong>\u00a0<\/strong><strong><u>Going Offshore<\/u><\/strong><\/h2>\n<p style=\"text-align: justify;\">The next step up from incorporating in another state is to \u00ab<a href=\"https:\/\/myhla.wpengine.com\/areas-of-practice\/biz-intl\/international\/offshore\/\">go offshore<\/a>.\u00bb \u00a0That means you can form your company in another country and then register it to do business in the state where you live. \u00a0This process is not as complicated as you might think. \u00a0The first step, of course, is deciding which <a href=\"https:\/\/myhla.wpengine.com\/areas-of-practice\/biz-intl\/asset-protection\/\">offshore jurisdiction<\/a> would be most favorable for your situation. \u00a0As a Florida law firm, we tend to stick with the Caribbean countries that are close to home. \u00a0Three countries with business-friendly laws are Nevis, Cook Islands, and Saint Vincent and the Grenadines.<\/p>\n<p style=\"text-align: justify;\">You will notice the discussion here is not about minimizing <a href=\"https:\/\/myhla.wpengine.com\/areas-of-practice\/tax-controversy\/\">tax liability<\/a> or <a href=\"https:\/\/myhla.wpengine.com\/areas-of-practice\/biz-intl\/asset-protection\/\">protecting assets<\/a>. \u00a0Many times those issues go together with limiting owner liability, but tax planning and asset protection are topics too complex to deal with in this short article.<\/p>\n<p style=\"text-align: justify;\">For purposes here, just be aware that you can find even more favorable laws by going offshore than you can by incorporating in a different state. \u00a0If you want to know the downside to organizing your company offshore, here are a few considerations:<\/p>\n<ul style=\"text-align: justify;\">\n<li>A bit more expensive&#8211;not terribly so, but a bit. \u00a0Annual fees tend to be higher than in US states.<\/li>\n<li>A bit more of a hassle. \u00a0Florida companies can literally be set up online. \u00a0It does not get much more convenient than that.<\/li>\n<li>Can raise a red flag. \u00a0Given the political and legal climate these days, banks and other businesses may be wary of doing working with your offshore company. \u00a0You may also draw scrutiny from the taxing authorities.<\/li>\n<\/ul>\n<p style=\"text-align: justify;\">As a business lawyer, I try to look at all the pros and cons of the available options and make a recommendation based on the client&#8217;s particular situation. \u00a0I do feel offshore companies provide an excellent vehicle for limiting personal liability. \u00a0In many\u00a0cases, going offshore may\u00a0be overkill . . . but it is certainly good to be aware of that\u00a0option.<\/p>\n<p style=\"text-align: center;\"><a href=\"http:\/\/cta-service-cms2.hubspot.com\/ctas\/v2\/public\/cs\/c\/?cta_guid=672eaf78-ed72-4214-a8f4-aee9b4ec0a73&amp;placement_guid=f5cd86ec-dfe9-4f66-81b7-a22ec77016d8&amp;portal_id=404249&amp;redirect_url=APefjpHOQAgEK40YZRTTj70EN95mfxqXI-MrpvTRMFftkL7IjC6e4hiWydWs9pr4fePpOGfcf_xvgbI1nLFwuEey7o31mHF6kVuNEtPrTAtyMP1Bw27jgVm7BL2uU0pcrDOqeCRT-6IEcv_ySNlTCeGZ3b7pV9W4qiSdA6Nr4HF0L2Cxc1pINOoAqhe4KBtMzDhA5vW7VgzL&amp;hsutk=&amp;canon=http%3A%2F%2Finfo.harringtonlawassociates.com%2Fblog%2Fbusiness-practices-limiting-personal-responsibility-part-iii\"><strong>More on Offshore <\/strong><\/a><\/p>\n<h2 style=\"text-align: justify;\"><strong>\u00a0<\/strong><strong><u>Company Documents<\/u><\/strong><\/h2>\n<p style=\"text-align: justify;\">Many new companies are formed without much thought for the governing documents. \u00a0That is a mistake for many reasons, but we will stay focused on personal liability here. \u00a0First, what are governing documents?<\/p>\n<p style=\"text-align: justify;\">The\u00a0<a href=\"https:\/\/myhla.wpengine.com\/areas-of-practice\/biz-intl\/business-ventures\/\">company&#8217;s governing documents<\/a>\u00a0are those that set out the basic structural information&#8211;i.e. owners, managers, officers, voting rights, board members&#8211;and establish the company&#8217;s bylaws. \u00a0 Most often, the structural information is contained in the company&#8217;s Articles. \u00a0For corporations, the document is call the \u00abArticles of Incorporation\u00bb while, for limited liability companies, it is called the \u00abArticles of Organization.\u00bb \u00a0This is typically a pretty basic document and, in Florida, it is actually generated automatically by the State Department when you establish a new company.<\/p>\n<p style=\"text-align: justify;\">Realize organizing in a business-friendly state, such as Delaware, or in an offshore jurisdiction means there\u00a0is\u00a0no public record of the ownership or management of the company.\u00a0 \u00a0How are you going to prove the company is yours or that you have authority to sign for the company?<\/p>\n<p style=\"text-align: justify;\">Make sure, at a bare minimum, you have company Articles.<\/p>\n<p style=\"text-align: justify;\">Next, there are company bylaws, which can be called by a few different names, just to keep things interesting:<\/p>\n<ul style=\"text-align: justify;\">\n<li>corporate charter<\/li>\n<li>partnership agreement<\/li>\n<li>operating agreement<\/li>\n<li>shareholder agreement<\/li>\n<\/ul>\n<p style=\"text-align: justify;\">The bylaws are much more comprehensive and usually include policies and rules about company decision-making, board meetings, admission of new members, officer duties and authority . . . and indemnification.<\/p>\n<p style=\"text-align: justify;\">This may sound a bit ridiculous, but simply having a clause in the company bylaws stating owners and officers are indemnified from company liability is really quite effective. \u00a0Courts will respect that simple clause.<\/p>\n<p style=\"text-align: justify;\">As discussed in\u00a0<a href=\"http:\/\/info.harringtonlawassociates.com\/blog\/business-practices-limiting-personal-responsibility-part-ii\">Part II<\/a>\u00a0of this series, it is important to set up your company in a way that makes it clear you are serious about establishing a viable company&#8211;as opposed to a \u00abthrow-away\u00bb company that you can just discard once the walls start closing in. \u00a0Having decent-looking company documents, preferrably drafted by a corporate lawyer, goes a long way toward demonstrating your good-faith in this regard. \u00a0Further, you can actually build in personal protections in the bylaws that will hold up surprisingly well. \u00a0The cost is not prohibitive, and any contract attorney will have templates that can be modified to your situation, so there is really no reason not to take this measure. \u00a0If you choose not to, you do so at your own peril.<\/p>\n<p style=\"text-align: justify;\">Limiting personal liability is a form of asset protection. \u00a0Understand there is a sliding scale ranging from the very simple to the very sophisticated. \u00a0There are lots of things you can do to protect yourself though, admittedly, for many small businesses, some of the available techniques would be overkill. \u00a0A good business lawyer will not try to sell you on a complex structure involving trusts, offshore entities, limited partnerships, etc. unless the benefits of doing so make good business sense.<\/p>\n<p style=\"text-align: justify;\">This article is purposely limited in scope. \u00a0It is not intended to touch on all the techniques you might use in setting up a new venture. \u00a0Business attorneys understand the realities of controlling costs in the early stages of a new endeavor. \u00a0Rather, the points touched upon in this series are more or less the bare minimum you need to know and do to protect yourself as a business owner or officer.<\/p>\n<p style=\"text-align: center;\"><a href=\"http:\/\/cta-service-cms2.hubspot.com\/ctas\/v2\/public\/cs\/c\/?cta_guid=c6788e52-150a-4681-84ab-179d0ac02568&amp;placement_guid=03d94317-3fa4-49d6-9840-40090ef499c9&amp;portal_id=404249&amp;redirect_url=APefjpEM-grf251daZ8KNjelP46R8tE4bRE-nGTAj_gylZAevKeefwJudtNnInc8yEeC9v3ulCLbeMiQS1LJPCjp7miZPPSbI4kFSj3mUP9sypcnId08F9pGvyy8fmftZ1adlbB3rywd&amp;hsutk=&amp;canon=http%3A%2F%2Finfo.harringtonlawassociates.com%2Fblog%2Fbusiness-practices-limiting-personal-responsibility-part-iii\"><strong>More on Business Law <\/strong><\/a><\/p>\n<p style=\"text-align: justify;\"><a href=\"https:\/\/myhla.wpengine.com\/attorneys\/jeffrey-harrington-esq\/\">~ Jeff Harrington, Esq.<\/a><\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>This is the final part to our discussion aimed at helping owners and officers avoid personal responsibility for the obligations and liabilities their companies take on in the course of doing business.  The first part provided an overview of the key issues related to corporate liability.  The second part focused on what not to do.  Here, we get to proactive techniques for guarding against personal responsibility.<\/p>\n","protected":false},"author":1,"featured_media":3096,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"om_disable_all_campaigns":false,"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[218,285,51,492],"tags":[179,253,113,112,114,133,129,115,128,39,132,193,174,180,251,252,127,124,125,130,131,126],"class_list":["post-1406","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-asset-protection","category-litigation-adr","category-business","category-company-formation","tag-attorney-jeff-harrington","tag-attorney-jeffrey-harrington","tag-business-attorney","tag-business-law","tag-business-law-firm","tag-company-set-up","tag-corporate-attorney","tag-corporate-counsel","tag-corporate-law-firm","tag-corporate-liability","tag-corporate-structure","tag-harrington-legal-alliance","tag-jeff-harrington","tag-jeff-harrington-esq","tag-jeffrey-harrington","tag-jeffrey-harrington-esq","tag-liability-protection","tag-limit-liability","tag-officer-liability","tag-offshore","tag-offshore-company","tag-vicarious-liability"],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/myhlaw.com\/es\/wp-json\/wp\/v2\/posts\/1406","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/myhlaw.com\/es\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/myhlaw.com\/es\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/myhlaw.com\/es\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/myhlaw.com\/es\/wp-json\/wp\/v2\/comments?post=1406"}],"version-history":[{"count":0,"href":"https:\/\/myhlaw.com\/es\/wp-json\/wp\/v2\/posts\/1406\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/myhlaw.com\/es\/wp-json\/wp\/v2\/media\/3096"}],"wp:attachment":[{"href":"https:\/\/myhlaw.com\/es\/wp-json\/wp\/v2\/media?parent=1406"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/myhlaw.com\/es\/wp-json\/wp\/v2\/categories?post=1406"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/myhlaw.com\/es\/wp-json\/wp\/v2\/tags?post=1406"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}