LLCs are a popular business entity that can provide comprehensive legal protection. Unfortunately, business owners who do not properly form or operate their LLCs can still be personally liable for the debts and liabilities of the business. Call Structure Law Group at 408-441-7500 to schedule a consultation with one of our experienced lawyers. We have helped many business owners throughout California protect their assets and rights through solution-oriented counsel and representation.
What is an LLC?
A limited liability company (LLC) is a type of business entity. When formed and operated properly, an LLC can protect business owners from liability, and shield their assets from being used to satisfy the debts of the business. This is because the LLC is a separate legal being from the individuals who own it. As a result, creditors can only access assets in the LLC’s name to satisfy the debts of the LLC. The owner’s personal assets are not available to business creditors.
In order to get this protection, a business owner must:
- properly form an LLC as required by state law,
- file taxes for the LLC as required, and
- separate business assets from personal assets.
The California Secretary of State maintains a list of basic filing requirements. But properly creating an LLC is only the first step. The business must continue to operate properly in order to meet the conditions described above. There are certain things business owners can do to prove that these conditions are met. For example: in order to prevent co-mingling of business and personal assets, it is important to have a separate bank account for the LLC. Bookkeeping should also clearly document the company’s profits and losses. This will not only allow you to easily prepare a business tax return, but it will also prove that you are separating your personal assets from those of the business.
Other Types of Business Entities
An LLC is not the only type of business entity that can protect personal assets from business liability. Limited partnerships, series LLCs, and certain types of corporations can also provide this protection. Though they generally provide less legal protection, sole proprietorships and general partnerships might also be appropriate in certain situations. Importantly, the business entity you choose will have an impact on issues related to liability and taxes. The manner in which you operate your business can also determine the type of business entity you will form. For example, owners, managers, employees, and contractors can all affect your business liability. Insurance coverage might change based upon the nature of your work. Liability for contract debts or personal injury claims will need to be addressed. A business formation lawyer can help you determine which type of business entity will best meet your goals.
Call Us Today to Schedule a Consultation with a California Business Attorney
Don’t put your personal assets in jeopardy. Let the experienced business formation lawyers at Structure Law Group help you create an LLC that will protect you, your family, and your personal assets from liability. Schedule a consultation by calling 408-441-7500 or contacting us online. Our experienced business attorneys will help you choose, create, and operate the type of business entity that best meets your needs.