The members of a limited liability company (LLC) are shielded from personal liability much like those of a partnership or corporation in that the business members are not held personally responsible for the debts or demands incurred by the company. Instead of the business being taxed as a separate entity however, the profits and losses are reported on the tax returns of the individual associates and the investors are only risking the money they have put into the business, their personal assets are protected.
Just as with a corporation certain exceptions will affect the issue of liability. The LLC must be recognized as a business separate from the owner’s other interests. The best ways to define it as such are by establishing an independent federal ID number, a checking account that is used solely for business purposes and by using a precise ledger to record nothing but business transactions.
The business has to be able to meet expenses and obligations. If an LLC business owner steps in to personally cover an outstanding debt he is risking the loss of protection from liability. Each investor has a responsibility to commit to contributing his share of sufficient funds to secure the business.
It should go without saying that any associate who intentionally commits a fraudulent or criminal act puts himself in jeopardy of losing protection from any liability issues that his actions might provoke. At the same time any associate of the business who is found to be directly responsible for accidental injury to another individual may also be open to risk.
If you are invested in a business that puts you in personal contact with clients and therefore at risk for possible harm to be done you might consider having a business insurance plan to back you up in case your limited liability is disregarded.
Before you enter into any business agreement that will put you under legal obligation consult with an experienced attorney in the field of business law. Contact the offices of Parker Lawyers @ 303-841-9525.