Some LLC Owners Are Making A Big Mistake

If you’ll give me just 5 minutes of your time, I’ll explain
how you can avoid making a serious mistake I observe  many LLC owners
make. They try to form a limited liability company (LLC) by
filing the initial form with the State Filing Office, usually
usually the Secretary of State.

However, after  doing the initial filing, they stop  and neglect to
finish the whole process of forming an LLC. This puts them
at risk for losing the protection for their personal assets
they were trying to get by filing  the LLC in the first place.

This problem oftentimes comes to my attention because I’m
one of the people they often call  to fix the problem.

Setting up an LLC is a process with several important
steps. It’s not difficult, but each step is essential. Before                                                                                                                 explaining these steps, I first want to explain how the
liability protection of an LLC works.

When a lawyer files suit against an LLC, they often sue the individual
owners also. They do this because they know that most small
businesses operated as an LLC do not have enough assets in
the business to pay off a legal judgment so they go after the
individuals and their personal assets also.

However, if the owner of an LLC can prove that that they
organized and operated your LLC as a separate legal entity
under the law, they are entitled to protection. This is
known as limited liability protection. It’s the long established law
that protects your personal assets from judgments against
your business.

Limited liability protection can provide a layer of protection
between your business and your home, vehicles,
retirement benefits, savings, recreational vehicles and
other personal assets. This protection is one of the main
reasons why business lawyers, like myself, strongly urge
people to operate their business in the form of an LLC or
corporation. However, this protection is not automatic. It
requires the LLC to be set up and operated properly. If not,
you leave yourself wide open to personal liability.

It’s no secret that we live in a lawsuit crazy society where
many people are willing to sue at the drop of a hat.
Unfortunately, if you’re in business, you make an easy
target. A lawsuit can come from an unhappy customer, an
injured person, a mad competitor or disgruntled former
employee. Regardless of the source, the results can be
financially devastating to you. And please don’t make the
mistake of thinking it can’t happen to you. Believe me, it
can. I’ve seen it.

The good news is that it’s not that arduous to complete
the process of forming an LLC.  By doing so, your ability to
protect your personal assets in the event of a lawsuit is
much stronger. To see if you have completed the process of
organizing an LLC, just answer the 6 questions below. If you
answer no to any of the questions, then you haven’t fully
completed the process: 

1. Have you filed Articles of Organization with the State
    Filing Office?
 
2. Have the members or owners of the LLC adopted or signed an
    Operating Agreement?

3. Have you conducted some form of an organizational meeting
    and prepared written minutes or other documentation?

4. Have you prepared written documentation showing the
     percentage ownership (or sharing ratio between members of
     the LLC)?

5. Have you obtained a new Employer ID No. (EIN) for the LLC
     from the IRS?

6. Have you set up a new bank account for the LLC as a
    separate legal entity?

Each step of the process is important to help prove that
you have fully organized and are operating your business as
a separate legal entity. This is what entitles you to the
limited liability protection of the LLC structure or form.

You can read more about these steps in the Special Report
“Four Essential Steps in Setting Up Your Own  LLC.”

Avoid making a serious mistake when organizing your own
LLC. Read about the “Four Essential Steps to Setting Up
Your Own LLC” by Attorney Robert Montgomery.