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The Port Law Firm in Florida frequently works with clients who are interested in ways to protect their personal assets from their business liability. The Limited Liability Company (LLC) is one of the most popular methods for accomplishing this. The LLC was first used in the state of Wyoming in 1977, where the state allowed businesses to have limited liability advantages and tax advantages similar to those of a corporation. Under the law, the LLC would not incur any taxes because profits pass to its members. Over the course of the decade following the Wyoming law, most states in the United States followed suit and created LLC laws of their own.
An LLC shields its owners from liability because it is made up of members with no personal liabilities for the debts created by the LLC. Members are responsible for managing the LLC and the protection allows them to do so without fear of losing their personal assets. An LLC also has the option of hiring a manager from outside its membership. The Operating Agreement of the LLC determines what rules and procedures will guide the company. Usually this founding document sets the course for success or failure for the company.
Charging Order
When it comes to collection, creditor’s have few rights concerning an LLC. They are unable to seize property to satisfy a debt and can only file a charging order should debts build up. The charging document entitles the creditor to only a member’s share of distributions should there be any. Creditors obtain charging orders from the court, a method of holding debtors accountable. Originally, a company could be shut down even if only one owner was liable for accumulated debts. Ownership partners without liability began to protect themselves from creditor attack and the charging order was born. A charging order is considered a lien on the debtor’s interest and is considered the only way for a creditor to pursue partnership interest. In other words, a charging order is the only way a creditor will get what it is owed when dealing with an LLC. A charging order does not give a creditor the right to make management decisions for the LLC and they are not considered an owner of the interest should there be a foreclosure to force payment of debts. Should an LLC stop its payments, creditors are granted no ability to force distributions. In spite of the charging order, LLCs are granted a great deal of protection from creditors.
Is it Right for Me?
So is an LLC the right decision for you and your company? It may take some time to make this decision. Meeting with an experienced asset protection attorney will help you weigh the pros and cons. You have several options besides the LLC, including traditional incorporating methods, and forming a limited partnership. Some benefits are shared between traditional corporations and limited partnerships, but not all companies are eligible to choose from all of the protection methods. Furthermore, you may find one method more advantageous than another.
It is important for your asset protection attorney to review your risks and your goals with you. If he understands how you are currently managing your company, how you would like to run it in the future, and what your risk level is, he will be able to guide you through the process of asset protection.
Business owners may also find that one type of protection is not enough. The Port Law Firm will help you create an asset protection plan that offers the premium amount of protection. You do not want to choose a plan that protects only 80% or less of your assets. By creating an LLC and considering personal investment and protection options, you increase your protection. This shields you from attack should the unexpected happen in your personal life or with your company. If you would like to explore your asset protection options and you are considering creating an LLC, speak with the legal professionals at The Port Law Firm in Florida.
This article is for informational purposes only. You should not rely on this article as a legal opinion on any specific facts or circumstances, and you should not act upon this information without seeking professional counsel. Publication of this article and your receipt of this article does not create an attorney-client relationship.
