Limited Liability – Protecting Personal Assets When Starting a Business
Limited Liability Companies, also known as LLC’s, are a type of business structure which generally allow for more flexibility than a traditional corporation structure, while also providing a similar protection for the personal assets of its members.
A Cap on Financial Liability
By forming an LLC, the members of the company are able to distance themselves, in a way, from any financial liability the company may have. The amount of money the members are each liable for is usually dependent on the value of their individual investments in the company. In other words, if a person establishes an LLC and invests $1,000 in it, and later on the LLC becomes liable for $5,000 in damages, the owner’s personal assets cannot be used against the damages, unless he or she was personally responsible for incurring the damages.
Legal Considerations
Although LLC status grants the members of the company some measure of protection in terms of financial liability, the protection is not absolute, and only extends to the financial obligations of the LLC itself, not the personal ones of its members. This means that any negligent or fraudulent conduct on the part of LLC members will make them fully liable for any damages that result.
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