12 Legal Problems Caused by Improper Entity Setup
Set up your entity wrong, and you can lose the liability cap that should shield your home and equipment. Commingling funds, skipping consents, or underfunding a single‑member LLC hands plaintiffs an alter‑ego argument. Personal guarantees can still stick you with the lease. Form in Delaware but work elsewhere and you risk fines, barred lawsuits, and lapsed good standing. Add payroll/S‑corp missteps, IP or domain assignments, and licenses, and projects stall. Stick around for the fixes. LLC Basics: What Liability Protection Covers Because an LLC is a separate legal entity, your liability for most business debts and claims is generally capped at what you’ve invested—not what you own personally. That shield typically covers bills, contract disputes, and lawsuits tied to the property or jobsite. But you can sign that protection away. If you personally guarantee a $50,000 lease, the lessor can pursue your home and bank account if the LLC defaults. You’re also personally responsible for your...