Asset protection: perhaps one of the strongest cases for becoming an LLC. however, you still want to be certain that you're kept a comfortable distance from your company. While we know that most people want to be entirely hands-on for the duration of your business life, we still encourage you to keep one foot behind the foul line. Let's look at the whys and hows an LLC can help protect your assets and others you may have under your wings.
Your business has done well. You own a nice home, a new car, and your kids are very comfortably on their way to college. It's the American Dream and it's what we're all after. Fiscal security is a reality that most can never really grasp but those that do never want to lose it again.
An LLC can assure that happen. Let's take for example a woodworking business. Perhaps you create a fantastically popular wooden toy. You make them yourself and you sell them online for an incredible markup. Your overhead is slim, your customer return rate is out of this world, and you're profiting in a way that helps you sleep well at night.
Then, a toddler rips off an eye from your toy and has $500,000 in medical bills and suffering. You're in court and risking the loss of everything you've worked so hard for just because you forgot a label stating the toy was for children 3 and up.
Perhaps a lawyer could have saved you, but it's too late for that now. Your head and your business are on the chopping block and there's nowhere else to turn. An LLC, if formed, would take the hit for you in this case rather than your own bank account.
As in the example above, let's pretend that you did create an LLC prior to the lawsuit happening. Your personal assets are protected, but what about your company assets?
It really depends on the value of your company and whom you can hire to protect you. If you are in rampant violation of serious laws, you're probably not going to come out of it with your company's head above water. If you aren't, and there's a way to contest your limited investment of the safety of your customers, you may still end up alright.
Therefore, never keep more assets in your company than absolutely needed to perform as an LLC. Your local laws can inform you more regarding the exact needs for your state, county, or even city. But if it is possible, keep your company on a skeleton budget if you are the sole proprietor or you are in a small partnership. You stand to lose less and, should you lose very little, can always drop the LLC and create another one that can avoid this pitfall in the future.
If you are an LLC that works specifically with clients, it is absolutely essential that you do everything to protect the assets of your clients if something happens to your LLC. Whether it is under investigation for tax reasons or some other problem pops up, your clients must be able to use your everyday business services. Whether you are helping them complete forms or simply offering software as a service, it doesn't matter; they need you.
And they may need the items that they've entrusted to you. How would you get to their articles or intelligence properties if your systems and files were taken? Always keep documentation upon what you own and what others own, even if those items are currently in your possession. In almost all states, your client's legal data cannot be held accountable for what your LLC has done (or the other way around).
However, there is another small step that you can take to provide even further assistance to clients and customers if something like this should happen to your LLC. What is that?
LLC insurance exists on the same platforms as other types of business insurance. Not only will it keep the LLC assets as safe as they can be, given the situation, but they will also provide access for your clients and customers. LLC insurance may also assist you for time out of the office and compensate your customers and clients for falling behind: an absolutely necessary thing for those who want to keep those customers and clients long-term during a situation like this.
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