If you’re an owner of a family business, you likely understand the importance of forming your business as a corporation or a limited liability company (LLC) to help protect personal and family assets. Your attorney has probably explained that these structures are designed to limit personal liability if the business encounters financial or legal challenges. 

In family enterprises where ownership, management, and personal relationships often overlap, maintaining that liability protection requires ongoing attention and discipline. The following practical steps can help family business owners preserve the legal separation between the business and the family and avoid unintentionally putting personal assets at risk. 

Maintain Clear Separation Between Family and Business

Family businesses often blur lines between personal and professional roles. When signing contracts, leases, purchase orders, or other legal documents be sure the agreement clearly states it is being entered into by the corporation or LLC, and that you’re signing as a shareholder or member of the business. 

Sign using your official title (such as “Member,” “President,” or “Manager”) rather than just your name. 

Keep Business and Personal Finances Strictly Separate 

It is especially important for family businesses to use a dedicated business bank account for all company income and expenses. Deposit all revenues into your business checking account and pay all expenses from this account.  

Avoid co-mingling your personal and business accounts. Using the business account for personal purposes risks you becoming personally liable for the company’s debts.

Stay Current on Required Annual Filings 

Corporations and LLCs must comply with ongoing state requirements. In Wisconsin, corporations and LLCs are required to file an annual report with the Wisconsin Department of Financial Institutions (“DFI”). It’s quick and easy and can be done through the DFI’s website.  

But if you fail to file an annual report and pay the annual fee ($25 online) for too many years in a row, your business could be administratively dissolved. For family businesses focused on longevity and generational transition, maintaining good standing is a basic but critical responsibility. 

Remain Up to Date on State and Federal Taxes

Family businesses often involve multiple owners, varying compensation structures, and succession planning considerations, all of which make tax compliance especially important.  

Work with a tax advisor to make sure you are filing your taxes correctly. Ask him or her for tips on how to maximize business deductions and depreciation, if appropriate. 

Carefully Review Personal Guarantees

When a family business enters a lease or secures financing, lenders frequently require personal guaranty from one or more family owners. This can mean that you agree to be personally liable for all amounts owed, even if your business goes under.  

Make sure you understand what you’re signing and seek out advice if you have concerns. If there are multiple owners, you may be able to limit your personal guarantee to a portion of the obligation. 

Family businesses are built for continuity, often spanning generations. Protecting the legal structure of the business is an essential part of preserving both the enterprise and the family’s personal assets.  

If you have questions about your existing corporation or LLC — or are considering forming a new entity as part of ownership or succession planning — an attorney at Stafford Rosenbaum can help guide you through the process.