Vent: People keep calling their LLC a corporation and it drives me crazy

I was at a networking event downtown last Tuesday and heard three different business owners say "my corporation" when they clearly meant their single-member LLC. It matters because the legal protections are totally different, and if you market yourself wrong you could lose limited liability in a lawsuit. Has anyone else run into this confusion with clients or partners who think they're protected when they really aren't?

2 comments

2 Comments

bettyroberts3d ago

Haven't you ever noticed how most states treat single-member LLCs as disregarded entities for tax purposes though? The owner reports everything on their personal return just like a sole proprietor, so saying "my corporation" is technically wrong since LLCs are a state law creation, not a federal tax classification. The real danger here is when people think having an LLC automatically gives them the same liability shield as a properly run corporation, but courts in places like California and New York have pierced the veil on sloppy LLCs plenty of times. I've seen judges look at whether you commingled funds or failed to keep minutes, same as they would with any business entity. Is the label really the issue or is it more about people not understanding how to maintain their protection regardless of what they call it?

black.jake3d ago

California actually pierced the LLC veil in a case back in 2017 over the owner paying personal credit card bills from the business account. @bettyroberts I think the label matters more than people admit. If someone calls it "my corporation" they're already thinking like a separate entity. Sloppy habits come from sloppy mindset from the start.