My grandfather (the absolute wisest man I have ever known) used to say to me: a.) Get a mechanic who won’t cheat you, b.) find a plumber who will always show up, regardless of the day or time, c.) marry a woman who is easy-going, and, d.) find an accountant who cares as much about your money as you!

(To his last point --- I have since concluded that, “there is no such person”, but I think I know what grandpa meant anyway.)

The world of business is all about “protecting yourself”, really. And since the number of people with whom you can do a “handshake deal” dwindles each and every year, it is becoming more and more critical that you find people, systems, and (unfortunately) “pieces of paper” that will enable you to sleep more than three hours a night.

Think about a typical day in business. You start out in marketing, where you must copyright and/or trademark your slogans and copy.

Then, you move on to sales, where you have to be sure to have non-compete and non-solicit agreements in place for your salespeople --- thus preventing them from “walking out” with an armful of your customers.

Next, you go into R&D. Where again you need “Intellectual Property Rights” agreements with your engineers and software developers, as well as good old patent and trade secret agreements to protect your products and processes from adoption by others.

Physical Plant? Here, you’re going to need guards, cameras, entry codes, foolproof identification, changeable lock combinations, instant employee updating, and secure perimeters.

Operations? Security in this area means inventory lists, more security cameras, bar codes, materials sign-in/sign out systems, and computer systems and software that can tie everything together.

Finance? These guys need bulletproof “firewalls” --- between and among your accounts payable, accounts receivable, and general ledger people and books. And this is just the beginning. You will also need multi-signature checks, double entry accounting, solid tax advice (no longer a “given”) and (probably most importantly) clear audit trails for all transactions.

Information Systems and Technology? – See “Finance”, above.

And I have only scratched the surface!

The reason I bring all of this up is because I often get asked about something I like to call “piercing the corporate shield”.

The question usually goes along the lines of this: “Even if I incorporate my fledgling business, can I still be liable personally?”

The answer? A resounding, “Yes, you can (be liable).”

Then comes the oft-asked follow-up, “But isn’t the corporate shield imperious?”

Hardly. The corporate shield can be broken, and sometimes it doesn’t take very much to break it. I’m fully aware of this because of a situation with one of my earlier companies. For example, let’s take something as nominal and seemingly trivial as Board of Director Minutes.

Many of the entrepreneurs I deal with, in terms of personal dealings as well as callers to the show and other business colleagues, ARE incorporated. Some of these same companies even have Boards of Directors --- this, despite my constant plea that they make certain that they have a Board --- and even fewer still keep accurate minutes of their meetings.

There are many ways to screw up those minutes. One very obvious way is to simply not keep them. So, and as a remedy, you do what a lot of companies do … you try to ‘re-create’ them the day before some civil hearing. Because you rushed, you get the events cited in those minutes crossed up with their associated dates. The judge notices this.

Guess what? You may have just “self-pierced” your vaunted “Corporate Shield” … just as a fifteen year old pierces his lip, you may have exposed your “corporation” as a sham.

(And why, oh why, Dear Lord would anybody consciously pierce his or her lip? Someday, the true iconoclast will be the person with NO piercings and NO tats. But that’s REALLY straying from the point of this piece, is it not?)

Is this really possible? (the shield, not the lip.) Can you lose corporate protection by simply and innocently neglecting to properly document your corporate records?

Yes, you can. And it happens a LOT.

You see, if it doesn’t “walk like a duck and squawk like a duck”, then the IRS (and others) may just determine that it probably isn’t a duck!

If you claim corporate status, and all of the legal protections, tax advantages and privileges ---- INCLUDING PROTECTING YOUR PERSONAL ASSETS ---- that such status provides, then you had better deeply respect and adhere to your obligations under that special status.

And yes, there are many other ways that a corporation can be deemed not to be acting like a corporation. But that’s for another column and/or another radio show.

But it oftentimes strikes me as quixotic. A business owner will do everything possible to protect himself. He will padlock his factory doors, put laser “trip wires” in his warehouses and guards on his trucks.

This same businessperson will hire auditors to watch his accountants and accountants to watch his bookkeepers and bookkeepers to audit his salespeople’s expense accounts.

And then he will turn right around and self-immolate his corporate protection by, for example, having insufficient capitalization in the form of assets and/or insurance. (Which is why people who talk about “incorporating themselves” really have no idea what they are talking about.)

So, my advice is:

• Get a great lawyer to first think of all of these things (Mike Fox, Arnie Gefsky, and the staff at Gefsky and Lehman come to mind) and then put all of the necessary and associated legal protections in place, and,

• Get a great accountant (who else? Dave Wilke – of Wilke and Associates!), who will make sure that all of your numbers, tax strategies, and employee/vendor/customer records are kosher, and,

• Find that great wife (or husband) that my grandfather mentioned!

All my best,

Ron