09/25/2026
Forming an LLC doesn't automatically protect your personal assets. How you operate it matters.
The Certificate of Formation (in Texas) creates the entity. It doesn't run the entity for you, and it doesn't protect you if you treat the company like your own personal bank account.
When personal and business finances blur together, one card for both, paying personal bills out of the business, skipping the paperwork that shows the company is real, you hand the other side an argument. In a dispute, they could ask a court to look past the entity and reach you personally. It's commonly called "piercing the veil" though that term isn't really applicable in Texas anymore. Another way to approach it may be an "alter ego" argument. It could also create issues for you if you get audited by the IRS. However, in plain terms, all this means you may not get the protection you thought you had.
The fix isn't complicated, but it takes discipline. Separate accounts. The company pays company expenses and not your personal expenses. Contracts signed in the company's name, not yours. Real records that show the business is run as a business.
The LLC is a tool. The protection comes from how you use it. An entity you run carefully can protect you. An entity you run casually is closer to just a filing fee and a useless piece of paper.
Think about this (but don't answer with your own personal information in the comments!) Where does your business stop and your personal finances start? If the honest answer is it's blurry, that's worth cleaning up.
General information only. Not legal advice. No attorney-client relationship is created by this content.