Are you a business owner? Does your business have protections against personal liability? Are you familiar with the exceptions to this corporate protection? GLO specializes in preparing and reviewing operating agreements and advising business owners on the most effective ways to avoid personal liability.

Forming an LLC: A Smart First Step

Starting your own business is a big step—and forming a limited liability company (LLC) in Colorado is often one of the first smart moves entrepreneurs make. After all, the promise of “limited liability” is appealing. It means that, in most cases, your personal assets—your home, car, savings—are protected if your business ever faces debts or lawsuits. But what many business owners don’t realize is that this protection isn’t absolute.

At GLO, we work with business owners every day to strengthen these legal safeguards. We prepare and review operating agreements, ensure clients understand their responsibilities, and help structure businesses in ways that protect owners from unnecessary personal exposure. Because while forming an LLC is a good start, it’s only the beginning when it comes to guarding against liability.

What Is the “Corporate Veil”?

When you form an LLC or corporation, you create a legal entity that is separate from yourself. This entity can do many of the things a person can—it can sign contracts, own property, take out loans, and sue or be sued. This separation is what’s known as the “corporate veil,” and it’s the foundation of limited liability. It exists to shield you—the business owner—from being held personally responsible for the actions or debts of your company.

How the Veil Can Be Pierced

However, courts can and do sometimes “pierce the corporate veil,” especially when business owners fail to respect the separation between personal and business affairs. If you’re mixing personal and company finances, failing to maintain clear records, or using the business as a shell to avoid responsibility, you’re at risk. And once that veil is pierced, your personal assets could be on the line.

In Colorado, these protections apply to LLCs, C corporations, and S corporations—but not to sole proprietorships or general partnerships. And even if your business is properly formed, the protection can quickly unravel if you aren’t following certain rules.

Common Mistakes That Undermine Protection

For instance, if your LLC doesn’t have a well-drafted operating agreement, or if you’ve failed to keep corporate records up to date, your liability shield may not hold. If you’re using the same bank account for both business and personal expenses, or if you’re not filing separate tax returns for the business, the court may determine that your company isn’t truly operating as a distinct entity. In short, they may find it fair to hold you personally responsible.

Fortunately, avoiding this outcome is entirely possible. By observing a few key practices—like keeping business and personal finances separate, maintaining updated corporate records, and following internal protocols—you can help ensure that your LLC truly functions as a separate entity. And when your business operates properly, your personal liability protection is far more secure.

GLO Can Help You Stay Protected

At GLO, we help business owners understand these nuances and stay in compliance. Whether you’re starting a new business or want to shore up the structure of an existing one, our team is here to guide you. If you’re unsure whether your business is truly protected, or if your corporate veil might be at risk, reach out. We’re ready to help you strengthen your business’s foundation and protect what matters most—your personal peace of mind.any of your employees) must maintain a separate bank account, file separate tax returns, and you should only use corporate assets for corporate rather than personal purposes.

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GLO has prepared this blog to provide general information on legal issues that may be of interest. This blog does not provide legal advice for any specific situation and this does not create an attorney-client relationship between any reader and GLO or its attorneys. GLO engages clients only through specific signed fee agreements. GLO does not guarantee any results.

Don’t be Pierced by the Corporate Veil: Avoiding Personal Liability for Your Business