LLCs at a Glance

Limited Liability Companies also known as LLCs are a popular choice for entrepreneurs mainly because this specific entity offers protection that other business types (i.e. sole proprietorships) just can’t match. An LLC is an entity that’s created under state law and can protect the business owner from personal liability. So when (God forbid) a business gets sued or files for bankruptcy, the owner’s personal assets are safe. This means that creditors and other entities won’t be able to go after your car our house when your business get sued or unable to make payments.

Exceptions

There are however, exceptions to an LLC’s protection. Some people think that just because they’re operating through an LLC, they can do whatever they want and still be protected. This is certainly not the case.

Even if you’re under an LLC, you will still be personally liable for tortious conduct (i.e. wrongful act or an infringement of a right) even if you’re acting on behalf of a company. This means that if you personally or directly injure someone, or if you intentionally engage in fraud, reckless, and other illegal acts, you WILL be held liable.

Moreover, an LLC will not protect you if you mess up your employee’s wages, treat the LLC as an extension of your personal affairs, or if you personally guarantee a loan or debt.

Get Insurance

Be sure to do extensive research on the specific protections that an LLC can offer. If you really want to be covered, get yourself a personal liability insurance or business insurance policy that covers liability.

Image credit: Orin Zebest on Flickr

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