Legal Question in Business Law in Maryland

corporate funds

When starting a new corporation, I do not expect to have much funds in the company at first.

So the question is, how can I manage to give funds to the corporation over time without crossing the ''corporate as a separate entity'' lines to be held liable if being sued.

and how can I legally pay myself, and 3 employees nothing (by agreement, doing this with trusted friends) untill the corporation earns an income and I can give myself and friends a ''raise'' for income.


Asked on 1/01/03, 7:15 am

1 Answer from Attorneys
Alton Drew Alton Drew, LLC

Re: corporate funds

In general, it is expected that shareholders will capitalize a new corporation. All you are doing is purchasing shares in your company to ensure that the company has funds with which to operate. You pierce the corporate veil when you use the corporation as your personal piggy bank. If you use company funds to buy your groceries or other personal items or you use the company's funds to guarantee personal loans, then you open yourself up to personal liability.

To legally pay you and your staff for the work you do on behalf of the corporation, one approach may be to take out a business loan to cover operating expenses. The loan will provide your corporation with an important asset (cash) and a liability. The other option is the one you are apparently pursuing now -- keeping your day jobs and waiting for the company to earn sufficient revenue.

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Answered on 1/01/03, 10:20 pm


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