Single Member LLC asset protection

[brianm4289]

I aplogize in advance if this topic has been beaten to death but I could not find it through the search. Is a single member LLC truly an effective way to have a company but still have personal asset protection? I keep reading and hearing such mixed opinions about it being useless and others say it's the best route to go... I know that keeping everything completely seperate as far as personal and business and following an operating agreement is the best way to prove that you are an LLC and not a sole proprietor. What I don't understand is how there is no real answer I have found, from the sounds of it if the judge is having a shitty day he can just pierce the veil and say your a sole proprietor and you are gonna be screwed... I am a one man show as of now and really have nobody that I want to distribute percentage of this company to but am planning on running it as a company and this is putting me in a roadblock mentally not knowing what to really do... any advice??

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[SueC]

You are going to have to jump through the same hoops as you would if you were forming a corporation, that is, you will have to paper your entity, as well as have the entity sufficiently capitalized. In other words, it can't just be a shell to protect you from liability, with no cash in the company, with no formalities being observed.

A judge can always pierce the veil whether you are an LLC or an S corp or even a single shareholder C corp, so you have to be ready for it. The entity choice won't protect you from that. Hire a lawyer and/or accountant who understands the ropes (and who will go into court with you if anything were to come up), keep your paperwork in order and have a real bank account with real balances.

It's also useful to make sure you even need to form an entity yet. Lots of folks start out forming the entity before they have any business. Don't get caught up in the paperwork if you don't have to.

 

[GlobalWealth]

Is a single member LLC truly an effective way to have a company but still have personal asset protection?

Yes, but only if done correctly. There are only 2 states that grant equal protection to single member LLC's as multi member LLC's - Wyoming and Nevada.

Your operating agreement is critical as well. No operating agreement, or a poorly drafted one = very little protection, if any.

Most people just register their LLC in their home state. In some cases this is the proper thing to do based on the business, but not always. You need personalized guidance, not legalzoom.