What is an LLC and LLC Protection??
The
two most common questions that new business owners have are
"What is an LLC" and
"What is LLC Protection and How Exactly Does an LLC Protect Me?"
What is an LLC?
An LLC is its own legal person separate and apart from its owners.
So, when you create an LLC for your business, the LLC itself is the
business. You are not the business. You are the person
who owns the business.
More
about what is an LLC:
The LLC is the actual person who customers do business with. The LLC
is the person who enter into all of the business contracts. When
the business is ready to hire employees, it is the LLC who is the
employer and not you personally.
You are not the business. You are simply the owner of the LLC. So,
when a customer, supplier, employee or any third party has a problem
with your business, that person must deal with the LLC. If that
person ever decides to sue the business, it must sue the LLC.
Accordingly, when one seeks to know what is an LLC, the important
concept is that it is "separate" from its owners . . . it enters
into business and acts on its own behalf. . . and it requires its
own set of attributes that both the LLC laws and its owners give to
the LLC.
What
about LLC protection?
The LLC laws of every state specifically protect owners of an LLC
from the LLC debts, obligations and liabilities. The laws generally
state that a member (owner) of an LLC is not liable for the
obligations of the LLC solely be reason of being a member.
This is the same protection afforded by corporations. The benefit of
getting LLC protection through an LLC over a corporation is that an LLC
affords LLC protection and provides
more flexibility and simplicity than corporations.
Without an LLC, you would have no LLC protection from personal
liability.
If you did not use an LLC and ran your business as a sole
proprietorship, then you would be personally liable for all business
obligations.
If you are personally liable and are not protected by LLC protection, then you are subjecting everything you
own to unnecessary risk. If someone were to sue you and win in
court, the court can take your assets (home, savings, cars, jewelry,
investments) to pay off the judgment against you.
On
the other hand, if you ran your business properly though an LLC, all
lawsuit judgments would be against the LLC not your personally.
So, your personal assets will be protected from being taken to
satisfy those judgments.
As
you can see, LLC protection is the most important attribute to
understand when learning about what is an LLC.
There are
Exceptions to Limited Liability Protection
Now,
most commentary on LLC liability would end here, business owners
need to know there are important and relevant exceptions and
conditions to LLC
protection.
Our eBook,
The Six Step LLC Formula for Limited Liability Protection, that
comes with our LLC formation services, provides the necessary steps
and requirements for you to ensure you use your LLC in the right way
and minimize loss of LLC protection to avoid the piercing the LLC veil challenge.
As you learn about what is an LLC,
I hope this gives you helpful information about how LLC protection
works and its limitations.
Because of this great benefit, it is universally agreed by lawyers
and accountants that businesses should always operate using a
limited liability entity such as an LLC for LLC protection. The costs are so low given
the tremendous benefits!
Many
think that lawsuits will not happen to them. But the
statistics prove otherwise. Small business owners are prime
targets for lawsuits including frivolous lawsuits! The
predatory litigation attorneys are out there.
Don't become one of many small business owner victims who are in shock
when they receive lawsuit papers after having not planned properly to protect
themselves in their business. Learn everything you can about
what is an LLC and how to best preserve LLC protection in your
business.
Learn How to Preserve LLC
Protection in Your Business in
6 Simple Steps
