Many business owners form an LLC thinking they are creating solid protection for themselves. But, without knowing what is an LLC and what needs to be done, you could be creating a ticking time bomb for liability instead.
What is an LLC? The limited liability company (commonly known as an LLC) is really a business protection vehicle for you and your business. If you properly form an LLC and then do the necessary things after formation to operate and maintain your LLC, you are creating a fortress of protection.
However, if you improperly form an LLC by missing any of the required formation requirements or you fail to follow simple steps after formation, your LLC may be defective, and a defective LLC is a prime target for lawsuits.
Think about this. As your business grows, you and your business will interact with more people and parties. You will have customers and may have employees. You will hire contractors and service providers. You may have a landlord. The dealings with third parties are necessary to success but every time you interact with a third party, there is a potential for a dispute, accident or lawsuit.
Then, as your business succeeds, it makes more money for you and your family. The business becomes a valuable asset. Lawsuits are really about money. Any place there is money, there will be people trying to figure out how to get their hands on that money. Many plaintiff attorneys make a living looking for such opportunities.
Now, if your business is making money and succeeding but you never formed an LLC as the legal vehicle for your business or worse yet, you spent the money to form an LLC but then did not properly maintain or operate the LLC, you are setting up a perfect situation for a lawsuit.
A predator now has what it needs to access to money and a chance to sue the owner personally so potential access to your personal assets. What is an LLC? It is a legally created vehicle designed to provide business owners with protection against personal liability.
However, the LLC has requirements to preserve protection and there are limitations to the liability protection- it does not cover every situation. Still, one should always form an LLC to gain the protection but do not make the mistake of just forming an LLC and doing nothing more. Learn what is an LLC – so you will know what it can and cannot do for you and your business and what you should be doing to make sure you are building a fortress of protection as your business succeeds and not a time bomb.
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