This week I’m telling a story that I hope catches your attention in a BIG way. Before we jump in, I feel it’s my duty to warn you that I’m not a novelist… just a simple tax strategist.
But, what I can promise is the moral of this story is as real as it gets. Most people do not act until it’s too late.
My only wish for Christmas this year (beside world-peace of course) is: Please, take action this year. Before it is too late!
Now… here is the story.
In a suburban neighborhood, Northern California, December 12th, 2021.
Christmas was supposed to be perfect that year. The tree was trimmed, the lights outside the house cast a warm glow on the quiet street, and the couple sat at their kitchen table sipping coffee, counting the days until their daughter came home from her swim meet.
Their business had never been better. A family-owned manufacturing company that had started in their garage now held defense contracts, cutting-edge prototypes, and a team that treated them like family. It was the kind of success most entrepreneurs dream of — the one where you look around and think, we’ve finally made it.
Then came the phone call that no parent ever wants to receive… their daughter had been in a terrible car accident on her way back from the swim meet.
They dropped everything. The contracts, the clients, the upcoming holiday parties — and raced to the hospital. For three weeks, they lived there. They prayed, they cried, and they clung to every small sign of progress as their daughter fought her way back.
When she finally opened her eyes, Christmas didn’t matter anymore. What mattered was that she was alive. Against all odds, she survived, and through months of physical therapy and sheer willpower, she eventually walked again.
The couple considered it a miracle. Life slowly returned to normal. The business recovered, new deals rolled in, and by the next December, their home once again smelled like pine and cinnamon.
Until one cold evening, just before Christmas, the doorbell rang.
The Lawsuit That Changed Everything
Standing on their doorstep was a man they didn’t recognize, holding an envelope that would change their lives.
They were being sued.
The other party from the accident had hired an attorney, claiming damages that reached into the millions. The parents were stunned. Their daughter had healed. Their family had survived. How could something from a year ago now threaten everything they’d built?
They called their lawyer. Then their tax strategist. Then anyone who could explain what was happening. What they learned next was devastating.
For years, they had operated their manufacturing company as a sole proprietorship. The contracts were in their names, the checks were deposited into personal accounts, and while they had an accountant who filed their returns, they never formed a proper legal entity. Nor did they really keep professional books. It’s just one of those things that gets put to the side when life gets in the way.
They didn’t have an LLC. No corporation. No shield.
That meant the lawsuit wasn’t just against the business — it was against them personally. Their home, their savings, their retirement accounts, even the cars in their driveway were fair game.
At first, they believed it was a mistake. After all, the company had contracts, a brand, and employees. Surely that counted for something? But in the eyes of the court, there was no separation between the business and the people who ran it.
The judge agreed with the plaintiff. Without formal separation — and with years of poor record-keeping that blurred the lines between personal and business expenses — the “corporate veil” was easily pierced.
That single oversight cost them everything. Nearly, anyways.
The Cost of Being Too Busy to Protect Yourself
I’ve seen this kind of story too many times in my career. Business owners are busy. They’re growing, hiring, managing, and chasing the next deal. The last thing they want to think about is paperwork or legal structure.
So they put it off. Until it’s too late.
When I share this story, people often ask: “Could this really happen?”
The uncomfortable truth is yes — and it happens every year. It’s not always a lawsuit. Sometimes it’s an IRS audit. Sometimes it’s a partnership dispute, an injury on company property, or a bad business deal gone sideways.
The pattern is the same: the entrepreneur is smart, driven, and hardworking… but unprotected.
In this couple’s case, they thought being incorporated would come later — once things “slowed down.” But as any business owner knows, things never slow down. You just get used to moving faster.
The Legal and Tax Lesson Hidden in Plain Sight
An LLC (Limited Liability Company) is more than a fancy title or a legal checkbox — it’s a wall between you and the storms that inevitably come with entrepreneurship.
When you run your business as a sole proprietor, everything you own is on the line. If you’re sued, the court can reach right into your personal bank account. If you default on a business loan, your house could be collateral. And if the IRS finds irregularities in your books, you can’t separate personal from business activity — because legally, there is no separation.
An LLC changes that. It draws a line in the sand. It says, “This is my business. That is my life.”
It protects your personal assets from business liabilities — but only if you maintain it properly. That means having a written operating agreement, keeping clean books, and respecting corporate formalities.
And if your business grows beyond a certain level, electing to have that LLC taxed as an S-Corp can take your protection and savings even further. It allows you to pay yourself a reasonable salary, then take the rest as distributions — often reducing your self-employment tax burden substantially.
But the point isn’t to get lost in the alphabet soup of entity types. The point is that this couple’s tragedy didn’t have to turn into a financial nightmare. Their daughter survived. Their business should have, too.
Piercing the Corporate Veil: When the Law Stops Protecting You
“Piercing the corporate veil” sounds like legal jargon, but it’s one of the most dangerous phrases a business owner can hear in court.
It means the judge no longer sees your business as separate from you. Maybe you mixed personal and business expenses. Perhaps you didn’t have minutes or agreements. Or, did you took profits without proper documentation?
When that happens, your LLC or corporation becomes a house of cards — and a skilled attorney can blow it right over.
In this couple’s case, the court looked at the facts: Their company had no formal entity registration, their accounting was sloppy, and they paid business expenses out of personal accounts. Those mistakes made it easy for the plaintiff’s attorney to argue that there was no business separation at all.
That’s why the verdict didn’t just touch the business assets — it reached into their personal ones, too.
The Human Cost of Avoidable Mistakes
Beyond the numbers, the hardest part was what came next.
To settle the lawsuit, they had to sell off a portion of their equipment. Since the company was no longer able to produce the goods for their lucrative contracts… they were canceled due to missed deadlines. Fines and damage to the business reputation spread like a California wildfire. Longtime employees were laid off right before the holidays. Projects that once promised growth were shelved indefinitely.
They lost millions in potential revenue — not because of poor management, not because of a bad product, but because of a lack of structure.
If you’ve ever built something from scratch, you know that kind of loss cuts deeper than any balance sheet can show. It’s emotional. It’s personal. And it’s preventable.
After the dust settled, the family’s attorney and tax strategist both agreed: if the business had been structured properly — with an LLC, clean books, and professional guidance — it’s likely 80% of the damage could have been avoided.
Let me repreat that so it really sinks in: Eighty percent. That’s the cost of waiting until “after the holidays” to get your structure in order.
The Real Gift You Can Give Yourself This Year
Every December, my phone starts to ring a little more. Business owners want to talk about bonuses, deductions, and year-end strategies — all the ways to save on taxes before the clock runs out.
And those things matter. But I often tell them the same thing: before you chase another deduction, make sure your foundation can handle the weight of success.
An LLC isn’t exciting. Proper bookkeeping isn’t glamorous. Having a tax strategist review your structure doesn’t feel urgent — until it becomes the most important decision of your life.
So maybe the best gift you can give yourself this Christmas isn’t under the tree. Maybe it’s peace of mind. The peace that comes from knowing your business is structured right, your books are clean, and your future is protected from the unexpected.
Because life can change with one phone call. And when it does, the only thing standing between you and financial devastation might be the paperwork you never got around to filing.
If you haven’t reviewed your entity structure this year — or if you’re not sure your LLC, S-Corp, or bookkeeping is properly set up — now is the time to fix it.
Now for the self-promotion in this piece (hint, hint)… I specialize in helping business owners build the right structures to protect everything they’ve worked for. Don’t wait until it’s too late. Book a consultation today.
Honestly, even if you do not use my services… use another professional. Don’t let this story become your story. Merry Christmas everyone.
Welcome to the New Age of Accounting. Let’s begin.
P.S. If you found this article helpful, you’ll love my new book S-Corp Mastery: How Smart Business Owners Maximize Tax Savings & Build a Lasting Legacy. It’s now live and available in a sleek, easy-to-read PDF version. Grab your copy here.
Chris is the Managing Partner at Weston Tax Associates, a best-selling author, and a renowned tax strategist. With over 20 years of expertise in tax and corporate finance, he simplifies complex tax concepts into actionable strategies that drive business growth. Originally from Sweden, he now lives in Florida with his wife and two sons.
