Having good legal infrastructure includes the structure of your business entity and how you manage it. Whenever I’m explaining to people how business entities work, I like to use an analogy.

Let’s say we’re all sitting at a conference table, you and I (and any others with us) are all sitting in our own chairs. We also need to pull up an empty chair – that one is for your business. In the eyes of the law, a business entity is its own “person” so it needs its own chair.

It acts separately from you and I. It enters contracts in its own name, has its own bank account, owns its own assets, has its own responsibilities and liabilities, its own employees, and so on.

The problem is, the business doesn’t have a physical body to take its own actions – we have to take actions for it. But how does anyone know when you’re taking an action for the business or when you’re taking an action for yourself personally?

You can’t sit in the empty chair at the conference table – you’d be sitting on the lap of your business. Because then you’re mixing your personal actions with business actions. They have to stay separate. That’s how you protect yourself from personal liability.

There are specific ways you have to take action when you’re acting on behalf of the business. Setting up your business entity with a good structure and managing the actions you take on behalf of the business is a critical part of your legal infrastructure.

Spend some time to assess your own business and determine whether this area could use some attention