Tuesday, June 30, 2009

The Truth About LLCs

Many entrepreneurs, when first launching a company, will form an LLC. That is, a Limited Liability Company.

In theory, if a limited liability company goes out of business, then landlords and other creditors cannot come after the owners' personal assets. They can collect only from the assets of the actual company.

While this is a great protection, be careful because there are some ways to screw this up. For instance, if you sign as a personal guarantee with a landlord or creditor - then you are personally responsible for money owed, even if your company fails.

Liability protection also would not be available to you if you intentionally committed fraud or failed to deposit taxes withheld from employee wages.

According to BusinessWeek.com:

In general, having an LLC operating agreement, maintaining a separate business bank accounts, obtaining a federal employer identification number, and properly funding the LLC can all help to protect individual owners from liability. It is also always smart to have business insurance in place to protect business owners in cases like yours.

I strongly recommend that you talk with a lawyer and/or your accountant to make sure that your personal assets are protected if something ever happened.

For more information about LLCs, visit:
http://www.irs.gov/businesses/small/article/0,,id=98277,00.html

1 comment:

  1. Thanks for the info. I have an LLC. Royalty Industries, LLC.

    ReplyDelete