By guest blogger Jerry Chiang

In starting any business enterprise, especially in the food industry, incorporating the business as a corporation or limited liability company is as important as having a good product or solid business plan. Incorporation is essential because it shields owners from the liabilities of their business. A lawsuit against the business will not impact the personal assets of the business owners because the law recognizes the corporation or limited liability company as a distinct and separate entity.

Incorporation by itself, however, is not enough. In order for the liability shield to remain in place, or for the law to continue to recognize the corporation or limited liability company as a separate entity, the entity’s owners need to observe certain formalities. If the owners are not careful, the law may treat the entity and the owners as one and the same and disregard the corporate entity. This is commonly referred to as “piercing the corporate veil.”

Over the next few days, this blog will give you an overview of what the courts look at when they decide whether to disregard a business entity and find its owners liable. We’ll also provide a list of dos and don’ts to help you avoid losing your liability shield. 

For more in-depth discussion of the latest case developments on piercing the corporate veil, especially as it relates to LLCs, keep up with Doug Batey’s blog, LLC Monitor.