Less Stress, More Money in Self Storage, Part 5
November 16, 2011 § Leave a comment
Whenever a new business is created, the form (or entity) that the business will take is discussed. Should it be a sole proprietorship vs. a corporation vs. a partnership vs. a limited liability company and so on. Typically, a Subchapter S corporation or a limited partnership or an LLC is chosen as the entity of choice. Why? Because they limit the true owner’s liability to third parties (as well has having certain tax advantages, too).
As a result of this decision, an attorney will be hired to create this new business entity and great care will be taken to set it up correctly. Dotting each “i” and crossing each “t”, so to speak.
However, this is not the end of the story. Each type of business entity has ongoing requirements that are necessary to keep it in existence and to keep it viable. Fees must be paid and forms must be filed. In the case of some entities, such as sub-S corporations, annual meetings need to be held and recorded.
What happens far too often, however, is that the business opens its doors, customers flow in and these ongoing niceties are forgotten. Then the unthinkable happens. Someone makes a mistake and a lawsuit commences. The owner leans back and says, “No worries, I have protection from personal liability because I put the business in a _______ “.
Unfortunately, good plaintiffs’ attorneys will oftentimes look to see if the corporation or the LLC has been kept in good working order. Have the fees been paid; the forms been filed. Has the owner been sloppy. If so, an argument can be made that the business entity is really a fraud and that the court should “look behind it” to see the real owner, i.e. you. All oof your good efforts to avoid liability have been wasted.
The advice here is to either task yourself or someone on your staff to be sure these details are followed. All of the time and to the letter. To make sure that annual fees are paid to the state and annual reports are filed. To make sure that the Board of Directors meets when and if they are required by law. That the “corporate book” is maintained.
Ongoing maintenance of these records will mean less stress and less stress means more money in self storage.