Your RI or Massachusetts Corporation May Not Shield You From Liability

As a Massachusetts and Rhode Island small business attorney, I often see business owners make the mistake of thinking that incorporating will automatically protect them from individual liability.  That is a common and dangerous misconception.  When a Rhode Island or Massachusetts corporation or LLC is properly formed, managed and maintained in accordance with corporate laws, it will shield the owner from individual liability.  However, many business owners are not aware of the several corporate formalities that must be followed in order for the corporate “shield” to protect the owner.  When these rules are not carefully followed, a Massachusetts or Rhode Island court will “pierce” the corporate shield; disregard the corporation or LLC for liability purposes; and hold the individual owner financially responsible for all debts and damages.  The required formalities differ for corporations and LLCs, and many are not intuitively obvious.  Given the potentially devastating consequences of failing to meet these formalities, no one should form or manage a Rhode Island or Massachusetts corporation or LLC without first consulting with an experienced Rhode Island or Massachusetts small business attorney.