The limited liability company is the best legal entity for a small business but not too long ago, some states did not allow an LLC to be owned by just one person. This did not bode well because solo owned businesses make up a large percentage of all small businesses. State lawmakers soon realized this and so now a single member LLC is allowed in every state.
Without an entity such as an LLC, the sole proprietor business owner risks everything he owns now and in the future. This is a huge risk to take for anyone especially given the lawsuit crazed society we live in. Accordingly, the single member LLC is now the best liability protection vehicle for the sole owner. It is the cheapest and easiest way for a business owner to get legal asset protection without having to deal with a lot of complexity and costs.
But, in order for the single member LLC to be assured to provide the right asset protection, it should always be run pursuant to the terms of a single member LLC operating agreement. Why is this? It is because the liability layer of a single member LLC is subject to a higher risk of being nullified in a lawsuit.
Because a single member LLC is so simple, lawyers like to try to convince judges that the single owner should be personally liable for the business. This is because the business is really just the alter ego of the sole owner. It appears to have the exact same features and is run like a sole proprietorship. Their arguments do make sense but it does not change the fact that the law states that if an LLC is formed and maintained properly for a business, it provides owners with liability protection no matter how many owners the business has.
Be aware that there are things you can do to prevent any challenge to your liability protection. The very first thing is to execute and formally approve a single member LLC operating agreement. This document gives your LLC a personality by putting in place a set of features and rules for which your business will be operated. By putting this agreement in place, you are creating solid evidence of your acknowledgment that it is the LLC and not you personally that is operating the business.
You see, if you ever run into business problems, it should be made clear that it is your LLC that is responsible for your business. The first think a court will order and lawyers will want to see is the official LLC documents. Second, they will want to know when they were adopted. By having the single member LLC operating agreement in place from the beginning, you will ward off claims. Do this so you do not have to worry about lawyers trying to convince judges that you should be personally liable for business debts. - 15246
Without an entity such as an LLC, the sole proprietor business owner risks everything he owns now and in the future. This is a huge risk to take for anyone especially given the lawsuit crazed society we live in. Accordingly, the single member LLC is now the best liability protection vehicle for the sole owner. It is the cheapest and easiest way for a business owner to get legal asset protection without having to deal with a lot of complexity and costs.
But, in order for the single member LLC to be assured to provide the right asset protection, it should always be run pursuant to the terms of a single member LLC operating agreement. Why is this? It is because the liability layer of a single member LLC is subject to a higher risk of being nullified in a lawsuit.
Because a single member LLC is so simple, lawyers like to try to convince judges that the single owner should be personally liable for the business. This is because the business is really just the alter ego of the sole owner. It appears to have the exact same features and is run like a sole proprietorship. Their arguments do make sense but it does not change the fact that the law states that if an LLC is formed and maintained properly for a business, it provides owners with liability protection no matter how many owners the business has.
Be aware that there are things you can do to prevent any challenge to your liability protection. The very first thing is to execute and formally approve a single member LLC operating agreement. This document gives your LLC a personality by putting in place a set of features and rules for which your business will be operated. By putting this agreement in place, you are creating solid evidence of your acknowledgment that it is the LLC and not you personally that is operating the business.
You see, if you ever run into business problems, it should be made clear that it is your LLC that is responsible for your business. The first think a court will order and lawyers will want to see is the official LLC documents. Second, they will want to know when they were adopted. By having the single member LLC operating agreement in place from the beginning, you will ward off claims. Do this so you do not have to worry about lawyers trying to convince judges that you should be personally liable for business debts. - 15246
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The greatest defense to defend off attacks on your personal protection is a proper single member llc operating agreement. For an expert single member LLC document package, click here: http://www.TheLLCExpert.com/single_member_llc.htm
