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Forming an LLC Alone Will Not Always Protect You

Jun 22, 2008
Did you know that many LLC business owners are still finding themselves at risk for being personally liable for the obligations and lawsuits of their business?

Wait! An LLC is supposed to protect the business owner from personal liability. A properly formed and maintained limited liability company does just that but many owners do not know the things they should be doing after formation to preserve the protection afforded by their entity.

Also, there are a few situations where an LLC business owner cannot escape personal liability. For example, say you were driving a company car on a business related trip and you were negligent (your fault) in a car accident. The other party can sue you personally and you will be held personally accountable and liable for your own personal actions.

It does not matter that you were acting as an agent of a business and engaged in business activity at the time. You cannot escape personal liability for your own tortious actions ever. What this means to a business owner is that your limited liability company should always have insurance policies to cover this area where the protection does not extend to.

While the above example is a type of liability an owner can never escape, there are many liabilities that LLC owners find themselves personally liable for that they could have avoided with proper planning.

The bottom line is that you cannot form a limited liability company and then just ignore it when running your business or fail to properly maintain the entity LLC as a separate business entity that is running your business.

It is important that an owner not only insist on proper LLC formation but also that he or she get the information needed to know how to properly operate and maintain the limited liability company after formation to ensure that he or she is best preserving protection.

An limited liability cmopany is really a liability protection vehicle. If it is not properly operated or maintained, it turns into a ticking time bomb which can cause you to lose everything. And, the more successful your business gets, the more likely it will be targeted for a lawsuit.

Make sure your LLC is acting as a fortress of protection for you and your family. . . get the proper education. The principles are simple. Most owners just do not know what they are and so do not comply with them in their businesses.

If you are just starting an LLC for your business, make sure you use a reputable attorney or online formation service that guarantees proper formation and, better yet, gives you the important education for what to do after your form your entity to avoid the fate of many other business owners who later are found personally liable despite having a limited liability company.
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