What an Entity Can’t Protect You From and How CPAs Can Help

While an LLC or corporation provides liability protection, it doesn’t make business owners immune to all risks.

There are several situations where personal liability still applies:

• Personal Guarantees – If you personally guarantee a loan or contract, you remain liable even if your business defaults.
• Taxes & Payroll Liabilities – The IRS and state tax authorities can hold business owners personally responsible for unpaid payroll taxes.
• Negligence & Personal Acts – If you personally engage in fraudulent, negligent, or illegal activity, an entity won’t shield you from lawsuits or criminal charges.
• Co-Mingling & Misuse of Funds – If you treat your business like a personal bank account, courts can ignore your corporate structure.

How CPAs Can Help Protect Business Owners

This is where a CPA becomes invaluable. A skilled CPA helps business owners:

• Ensure Proper Recordkeeping – Maintaining accurate financial records and keeping personal and business finances separate is crucial to preserving liability protection.
• Advise on Tax Compliance – CPAs help businesses meet tax obligations, avoiding personal liability for unpaid payroll or sales taxes.
• Guide Financial Structuring – Proper financial planning can help reduce risks tied to personal guarantees and unnecessary liabilities.
• Identify and Correct Risky Practices – CPAs can spot financial habits that might lead to piercing the corporate veil and offer proactive solutions.

Final Thoughts

An entity provides a foundation for liability protection, but only when managed correctly. Partnering with a CPA ensures you remain compliant, financially sound, and personally protected from risks that an entity alone cannot shield you from. Smart financial management and legal compliance go hand in hand to safeguard both your business and personal assets.