Myths, Legends, and Lies…. (#3)

“Corporate status will protect me from liability; I’ll just declare bankruptcy and shut down.”

Courts can and do pierce the corporate veil in small, closely held corporations.  Not being able to provide legal advice (which is a disclaimer agents should provide), this is not to be construed as legal advice; but agents should not let a statement such as this one go by unchallenged.  Governance and tax considerations should drive the choice of a legal entity-type, not protection against personal liability.  A one or two man corporation can very likely expect to see the veil of corporate protection removed if the injury or damage is severe enough.  This myth is used to avoid purchasing an umbrella or excess policy.  As stated before, don’t risk a lot for a little!

Untitled design (15)

Source:  Christopher Boggs, Insurance Journal.