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Forming an LLC to Protect Yourself

Published Thursday, October 9, 2008 by bloggerblognet83280 | E-mail this post

The limited liability company provides many advantages for building a small business especially in the areas of asset protection, taxes, and operational ease and flexibility. However, the biggest and main reason to create one is for liability protection.

The best way to explain the liability protection is to give you two real live examples of what can happen if you do not have this protection. Names are changed in these examples to protect identities.

EXAMPLE #1- Jackson and His Contractor

Jackson is a real estate investor who holds his properties in his own name. Two months ago, he hired a painter and the painter fell off his ladder and hurt his back while working on Jackson's property.

The painter cannot work while he recovers and his lawyer is advising him to sue the owner of the property for medical expenses and lost income.

The owner of the property is Jackson who did not prioritize the forming of an LLC for his business. If the painter is able to prevail in court, Jackson will be personally liable for these claims. Imagine that he could be personally on the hook for supporting this contractor while he recovers! If only he had used an LLC to protect himself.

EXAMPLE #2 - Allison and Her Diabetic Customers

Allison is in the business of selling diabetic supplies. It is a great business because her customers buy from her on a regular basis to serve their needs. Last month, her supplier main suddenly and without notice went out of business. Now, her customers who happen to be diabetics are threatening to sue her for failing to timely provide them with these needed supplies. One has just filed a legal claim.

Because Allison runs her business as a sole proprietor and not through an LLC, when her business is sued, she is being sued personally. If she had formed an LLC for her business, she would still have a business problem but it would not reach her personally.

This difference is what LLC protection can provide and when you get sued, this difference is huge when it comes to sleeping well at night.

You may be thinking that your business does not involve liability potential like diabetic supplied or working with contractors who can get hurt. However, there are many others who had the same belief and are now shocked after being served lawsuit papers.

Lawsuits are really about money. Anytime your business interacts with another person or party, there gives rise to a potential dispute or injury. Business activity that happened years before when you were just starting out can come back as a lawsuit later. And, the more money your business makes, the more of a target you will be for a lawsuit.

Forming an LLC is for protection and is like an insurance policy to protect you and your personal assets. Don't become a victim like Jackson or Allison who did not prioritize this important business planning step until it was too late.

Learn More about Forming an LLC for asset protection and get a Free LLC Guide at http://www.TheLLCExpert.com

Blogger BlogNet14727

Forming an LLC to Protect Yourself

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