In my experience, the general idea that having the corporation takes your personal finance out of the mix is just a myth. Until your corporation has a large asset base and years of history, every time you want trade credit, you have to sign the personal guarantee. And, more important, every time you want commercial credit, as in a bank loan, you have to submit your personal financial statement and sign personal guarantees as well. I think what happens is that technically, legally, the corporation is a separate entity, not you; but the creditors don't buy that for a minute, so they insist that you show your personal finances and sign your personal guarantee.
There's a very powerful word that the lender can use to go straight through that would-be corporate shield: "no." And the know how to use it. I've owned a corporation for 22 years now, and it was only in the last few years that we managed to do anything significant in this area without the personal guarantee.
As for whether the corporate shield protects your personal assets, I can find lots of attorneys to say yes, they do -- but I'm still skeptical. My fear is that in a pinch the creditors would sue both your corporation and you as the person responsible for it, alleging fraud or misuse of funds or something like that. Maybe I'm just worrying over nothing, but I've never felt safe from responsibility because I was shielded by a corporation.
I don't blame you for being confused. These things are not that simple. Consult an attorney who you trust for further advice.
Tim Berry is the chairman of Eugene, Ore.-Palo Alto Software, which produces business-planning software. He founded Bplans.com and wrote The Plan-As-You-Go Business Plan, published by Entrepreneur Press. Berry is also a co-founder of HavePresence.com, a leader in a local angel-investment group and a judge of international business-plan competitions.