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How Does an LLC Protect Member Assets?
A limited liability company (LLC) is a legal business structure that combines the flexibility of a partnership with the liability protection of a corporation. It is a popular choice for small business owners because of its relative ease of setup and maintenance while it still offers important legal protections.
If you are starting a business or already running one, you may have heard that forming an LLC can help protect your personal assets. But what you may not know is what that really means or how LLCs help protect your assets and shield your personal property from business-related risks in practice. An Oakland Park, FL business attorney can advise you on whether the LLC business structure is right for your venture.
How Does an LLC Protect You From Liability?
Without an LLC, you and your business are legally the same entity. This means that business debts, lawsuits, and liabilities can directly impact your personal property. Creditors can pursue your house, car, personal bank accounts, and retirement funds to satisfy business obligations. An LLC changes this by creating a separate legal entity for your business. When someone sues your company or your business cannot pay its debts, creditors must generally look only to the LLC's assets. Your personal assets remain protected by the liability shield.
How Does the LLC Protect Against Business Debts?
The LLC protection extends to all types of business debts. If your LLC accumulates credit card debt, unpaid supplier invoices, or equipment loans and must close, you generally are not personally liable for these obligations. The LLC’s protection gives business owners the confidence to take calculated risks and pursue growth opportunities without fear of losing their homes or life savings.
When Does LLC Protection Not Apply?
LLC asset protection is not automatic or absolute. You must maintain proper separation between business and personal finances to preserve the shield. Mixing personal and business funds, paying personal expenses from business accounts, or treating the LLC like your personal piggy bank can destroy your protection.
In these cases, courts may "pierce the corporate veil" and hold you personally liable if you do not respect the LLC as a separate entity. Additionally, personal guarantees on loans or leases eliminate LLC protection for those specific obligations.
LLCs also cannot shield you from liability for your own wrongful acts or professional mistakes. If you personally commit fraud, cause accidents through negligence, or provide defective professional services, you remain individually liable regardless of your LLC structure.
Call an Oakland Park, FL Business Law Attorney
If you are wondering what corporate structure is right for your business or want to ensure your business is set up correctly, you can speak to the experienced Fort Lauderdale, FL business law attorney. At The Elliot Legal Group, P.A. the firm counsels businesses on all aspects of corporate law and can help your organization be legally protected. Call us at 754-332-2101 to set up a consultation.
