Will Having a Limited Liability Company Help Protect My Assets?
A limited liability company has great benefits for any business owner. Unlike a partnership or sole proprietorship where there is no legal distinction between your personal assets and those in business, LLCs ensures that business owners aren’t held liable for any debts their businesses incur. The creditor can only go after the assets invested into the business by the owner and not his personal assets. It’s however, important to note that the level of liability is limited.
What kind of liability protection does an LLC give you?
Limited liability companies are mostly formed to avoid personal liability for the debts that a business may incur. An LLC gets to pay any debts and liabilities and your personal assets cannot be touched. As an LLC owner, some of the risks you take on include the personal liability for your actions related to the business, personal liability for LLCs debts, and personal liability for actions by employees or LLC co-owners in regards to the business.
Being that an LLC is not absolute, there may be cases where your personal assets may still be at risk. In Salt Lake City, for example, law firm Christensen Young & Associates stresses the importance of consulting with an experienced asset protection lawyer to ensure that you’re well protected from any liability.
Options to strengthen your LLC asset protection
Fortunately, you can still lessen the risk to your personal assets from your LLC. Here are some options you’d want to consider.
1. Operate your limited liability company as a separate entity.
Most LLC owners use the businesses funds or mix the funds with their own personal assets. This is a huge mistake as creditors may claim that you’re only running an LLC to shield your assets and may take the opportunity to even confiscate your personal assets. Run your business as an independent business entity to avoid getting into this trap.
2. Capitalize your LLC
Before opening an LLC, put enough capital in the business to adequately meet its obligations. This reduces the need to take out business debts.
3. Take a trust
A trust allows you to place all your liquid assets, investments, and home into it, meaning that your personal assets will be protected from creditors.
LLC can provide numerous benefits to business owners. So if you feel that you need to protect your assets from creditors, talk to an asset protection attorney who will evaluate your situation and help you come up with a comprehensive asset protection plan.