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LLC

Overview
The Limited Liability Company (LLC) has become a powerful tool for accomplishing many asset protection goals. The LLC is the most versatile and convenient strategy for owning rental property, insulating Dangerous Assets, operating a business, and achieving an excellent level of financial privacy.

The bad news, for physicians and some other professionals, is that state law generally does not allow these practices to be operated as an LLC. The liability shield available to business owners has not been extended to doctors-due to opposition primarily from the trial lawyers. Although the LLC may be useful in protecting accumulated assets from lawsuits, it will not insulate the individual from the liability associated with a medical practice.

Benefits

Inside Liability Protection
A member of an LLC is not responsible for claims or judgments against the company. When we are dealing with a rental property or an active business, the potential liability associated with the business is a primary concern. But as we have stated, the law specifically provides that the members of the LLC cannot be sued. In our previous case study, John and Mary transfer their apartment building to an LLC. If a tenant is injured in an accident, John and Mary, as members of the company, would be protected from any claim relating to the property.

Outside Liability Protection
Property held in an LLC cannot be seized by a creditor of a member. If there is a judgment or claim against John or Mary, the creditor cannot reach the property held in the LLC. As is the case with the Family Limited Partnership, assets of the LLC are protected from potential claims against a member. The creditor is limited to the ineffective charging order remedy. A creditor with a judgment against a member of the LLC is only permitted to take whatever actual cash distributions are made by the company. The creditor cannot force a distribution or demand any portion of the assets of the company.

No Formalities
An LLC is not required to maintain formal minutes and resolutions. Record keeping requirements can be minimized without a threat that the members will be sued individually for a liability of the company. Contrast this treatment with that of a corporation. If the proper formalities are not followed, the corporate protection will be pierced and the owners will have liability for company obligations. The LLC law is specifically intended to remedy this problem by providing that the entity cannot be pierced because of a failure to maintain any of the corporate type documents.

Be Aware
A creditor is not limited to a charging order against an interest in a single member LLC. Although it is convenient for tax purposes- it may not provide the asset protection you desire. In those cases where a single member LLC is necessary for tax considerations, full asset protection can be maintained by properly structuring the ownership of the company

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