There are thousands of solo owned businesses in the United States. When the limited liability company was first created, many states did not allow a single owner to form a limited liability company. However, state legislatures came around because single owners need as much protection as others when it comes to running a business.
A sole proprietorship business, which is one operated without the benefit of a legal entity, causes the solo business owner to place everything he owns at risk of loss. This stifles new business growth. The single member LLC is the ideal entity for these solo owned ventures because they are very affordable to form and easy to operated and maintain. Now, solo owners can get the personal asset protection they need.
However, it is essential that every single member LLC adopt a formal written single member LLC operating agreement. This important step can mean the difference between full protection and losing all protection. Why? Because a solo owned LLC has an increased chance of losing its protection due to the owner not doing enough to run his business through the limited liability company.
Because a single member LLC is so simple, lawyers like to try to convince judges that the single owner should be personally liable for the business. This is because the business is really just the alter ego of the sole owner. It appears to have the exact same features and is run like a sole proprietorship. Their arguments do make sense but it does not change the fact that the law states that if an LLC is formed and maintained properly for a business, it provides owners with liability protection no matter how many owners the business has.
A smart business owner can take simple but formal steps to make sure that the LLC protection remains in place. One of the most important steps is to prepare and adopt a single member LLC operating agreement for the business. This agreement gives your LLC its own set of rules and processes for running a business. This important formality provides proof to the world and to the judges that you treated the LLC as a separate person and it is the LLC, pursuant to the provisions of the document, that is running your business. You are an agent of the LLC implementing the operational activity.
If your business ever gets sued, the judge and attorneys will want to review your official LLC documentation. By having a single member LLC operating agreement, adopted from the beginning of your business, you are significantly reducing any claim that you have ignored your LLC and should be held personally liable for business liabilities and lawsuits. This will save you lots of money in legal costs as well as you will not have to defend any allegations related to this.
A sole proprietorship business, which is one operated without the benefit of a legal entity, causes the solo business owner to place everything he owns at risk of loss. This stifles new business growth. The single member LLC is the ideal entity for these solo owned ventures because they are very affordable to form and easy to operated and maintain. Now, solo owners can get the personal asset protection they need.
However, it is essential that every single member LLC adopt a formal written single member LLC operating agreement. This important step can mean the difference between full protection and losing all protection. Why? Because a solo owned LLC has an increased chance of losing its protection due to the owner not doing enough to run his business through the limited liability company.
Because a single member LLC is so simple, lawyers like to try to convince judges that the single owner should be personally liable for the business. This is because the business is really just the alter ego of the sole owner. It appears to have the exact same features and is run like a sole proprietorship. Their arguments do make sense but it does not change the fact that the law states that if an LLC is formed and maintained properly for a business, it provides owners with liability protection no matter how many owners the business has.
A smart business owner can take simple but formal steps to make sure that the LLC protection remains in place. One of the most important steps is to prepare and adopt a single member LLC operating agreement for the business. This agreement gives your LLC its own set of rules and processes for running a business. This important formality provides proof to the world and to the judges that you treated the LLC as a separate person and it is the LLC, pursuant to the provisions of the document, that is running your business. You are an agent of the LLC implementing the operational activity.
If your business ever gets sued, the judge and attorneys will want to review your official LLC documentation. By having a single member LLC operating agreement, adopted from the beginning of your business, you are significantly reducing any claim that you have ignored your LLC and should be held personally liable for business liabilities and lawsuits. This will save you lots of money in legal costs as well as you will not have to defend any allegations related to this.
About the Author:
The best defense to fend off challenges on your personal protection is a proper single member llc operating agreement. For an expert single member LLC document package, visit: http://www.TheLLCExpert.com/single_member_llc.htm
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