Solo owned businesses make up the largest percentage of business in the US. However, when the LLC laws were first passed, some states did not allow for a single owner to get the protections of this legal entity. This did not make sense and so now all states allow a limited liability company to be owned by just one member. Solo owners need protection just as much as others.
Without an entity such as an LLC, the sole proprietor business owner risks everything he owns now and in the future. This is a huge risk to take for anyone especially given the lawsuit crazed society we live in. Accordingly, the single member LLC is now the best liability protection vehicle for the sole owner. It is the cheapest and easiest way for a business owner to get legal asset protection without having to deal with a lot of complexity and costs.
But, in order for the single member LLC to be assured to provide the right asset protection, it should always be run pursuant to the terms of a single member LLC operating agreement. Why is this? It is because the liability layer of a single member LLC is subject to a higher risk of being nullified in a lawsuit.
An LLC is legally a separate person from its owner. So, it is the entity and not the solo owner who is the official provider of the business activity. Often times, a solo entrepreneur will form an LLC and then forget it exists and run the business as if it were a sole proprietorship. It is too easy to do this without other partners to answer to. Lawyers like to challenge this by arguing that a solo owner should be held personally liable because he failed to actually recognize his LLC and use it to run the business. This is contrary to the law but judges sometimes are swayed by this argument.
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.
You see, if you ever run into business problems, it should be made clear that it is your LLC that is responsible for your business. The first think a court will order and lawyers will want to see is the official LLC documents. Second, they will want to know when they were adopted. By having the single member LLC operating agreement in place from the beginning, you will ward off claims. Do this so you do not have to worry about lawyers trying to convince judges that you should be personally liable for business debts. - 15790
Without an entity such as an LLC, the sole proprietor business owner risks everything he owns now and in the future. This is a huge risk to take for anyone especially given the lawsuit crazed society we live in. Accordingly, the single member LLC is now the best liability protection vehicle for the sole owner. It is the cheapest and easiest way for a business owner to get legal asset protection without having to deal with a lot of complexity and costs.
But, in order for the single member LLC to be assured to provide the right asset protection, it should always be run pursuant to the terms of a single member LLC operating agreement. Why is this? It is because the liability layer of a single member LLC is subject to a higher risk of being nullified in a lawsuit.
An LLC is legally a separate person from its owner. So, it is the entity and not the solo owner who is the official provider of the business activity. Often times, a solo entrepreneur will form an LLC and then forget it exists and run the business as if it were a sole proprietorship. It is too easy to do this without other partners to answer to. Lawyers like to challenge this by arguing that a solo owner should be held personally liable because he failed to actually recognize his LLC and use it to run the business. This is contrary to the law but judges sometimes are swayed by this argument.
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.
You see, if you ever run into business problems, it should be made clear that it is your LLC that is responsible for your business. The first think a court will order and lawyers will want to see is the official LLC documents. Second, they will want to know when they were adopted. By having the single member LLC operating agreement in place from the beginning, you will ward off claims. Do this so you do not have to worry about lawyers trying to convince judges that you should be personally liable for business debts. - 15790
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The greatest weapon to fend off challenges on your personal protection is a professional single member llc operating agreement. For an expert single member LLC document package, visit: http://www.TheLLCExpert.com/single_member_llc.htm