Liability Protection

Liability protection is one of the main reasons why small business owners incorporate offshore; many people do not realize that the liability protection is not automatic. Persons and businesses must follow corporate formalities, otherwise they can fail to protect corporate entitie's liability.

Corporate shareholders are still liable for their actions, and if they get sued individually, creditors may go after their shares of the corporation. This can also happen if the 'corporate veil is pierced', and shareholders are held liable for the corporation's debts.

If a shareholder is found liable for his actions, the creditor will be allowed to seize the shares of stock of the corporation, and participate in companie's management, or sell these shares. If the shares represent more than 50% ownership in the corporation, the possibility exists that the creditor may vote to liquidate the corporation.