You may have noticed the initials “LLC” following certain business names in much the same manner that you are accustomed to seeing “Inc.” The latter abbreviation is used by corporations, and most of us are aware of how they operate since they have always been so common. But an LLC is in fact a “limited liability company;” notice that that last word is company and not corporation.
In corporations the principle shareholders and officers can be held personally liable for the actions of the business entity. Limited liability companies are different, and this is why they are used by people who are in some type of business who are looking for asset protection. Though the limited liability company itself can be sued, the owners of the LLC, who are called “members,” are not personally subject to litigation due to actions undertaken by the limited liability company.
There are some things to take into consideration if you plan on using a limited liability company to protect assets. Cash distributions to members from the limited liability company can indeed be attached by creditors. And you don’t want to have the LLC pay your bills directly to get around this because this can be construed as evidence that “pierces the veil” between the personal finances of the member or members and the financial machinations of the limited liability company.
People who invest in rental properties and streamlined business ventures often use limited liability companies to protect their personal assets. But it should be noted that some holders of professional licenses such as doctors are not allowed to operate as an LLC.
If you’re interested in learning more about limited liability companies and how they can help you protect your assets, don’t hesitate to pick up the phone and arrange for a consultation with an experienced and savvy financial planning attorney.