Corporation or LLC is not a “Get Out of Debt Free” Card


The Federal Trade Commission recently settled the largest-ever fitness and weight loss deceptive advertising complaint, against Ab Circle Pro, for up to $25 million. The FTC settled with not only the marketer, but the producers and star of the infomercial — and the individual owners of the marketing corporation.

It is a myth that forming a corporation or limited liability company will safeguard your personal assets in all situations.

The limited liability coming from entity formation protects the personal assets of the company owners by creating a separate legal entity that is the corporation or LLC. Generally speaking, if an entity is properly formed, properly maintained and properly capitalized, the founders risk only their initial capital contribution. Also generally speaking, “piercing the corporate veil” to defeat limited liability and sue the owners of an entity individually is as rare and severe as a lightning strike.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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