Business & Incorporation: If one is not concerned about anonymity, is there really any benefit to forming a single-member LLC?

Asked over 1 year ago - Los Angeles, CA

I understand that LLC means a Limited Liability Company--its members are not vicariously liable for the debts or torts or negligence of an agent of the LLC, including another member.

However, an agent or member who actually commits a tort or negligence IS personally liable; that agent or member who actually commits a tort or negligence cannot shift liability to the LLC.

So, if one is not concerned about anonymity, is there any point in forming a single-member LLC that hires no employees?

After all, the single managing member is the individual who performs all actions or duties or services for the LLC, so if he commits a tort or an act of negligence, then that individual is going to be personally liable for whatever he does--he or she cannot protect his personal assets from liability.

Attorney answers (5)

  1. Charles Richard Perry

    Pro

    Contributor Level 16

    15

    Lawyers agree

    Answered . Person A forms LLC to hold a rental property. All leases are between LLC and tenant. Some months later, the tenant claims an injury because of some problem with the building, which the LLC (as the owner) allegedly did not fix. The LLC is liable, but not Person A.

    There are many other examples. Whether an LLC makes sense in any given situation depends on the facts involved.

  2. Michael Charles Doland

    Contributor Level 20

    13

    Lawyers agree

    Answered . While you raise some interesting and valid points, there remain good reasons to form a business entity, and to do so properly.

    A properly formed and maintained business entity provides potential tax benefits not available in a dba scenario. Further, while a business entity, including corporations, LLCs, Limited Partnerships do not provide a substitute for insurance, insurance only covers negligent, non-intentional matters, and there are numerous other reasons why one might desire or require an independent taxpayer, even if treated as an individual, for protection. Then there are the benefits, after the startup stage where personal guarantees remain the norm, when the business entity develops its own credit worthiness.

    A CPA, an attorney and and an insurance agent would be a minimum team to consider for a startup. Good luck in your venture.

    The above is general legal and business analysis. It is not "legal advice" but analysis, and different lawyers may... more
  3. Andrew Kevin Jacobson

    Pro

    Contributor Level 16

    11

    Lawyers agree

    Answered . While you are correct about negligence, there are still many types of litigation that are based upon contract, and in those situations, the LLC owner is not liable for the contractual debts of the LLC, unless the owner personally guaranteed those debts at the time they were created.

    www.bayoaklaw.com. 510-208-5500. This answer does not create an attorney-client relationship. It is not legal... more
  4. Douglass S Lodmell

    Pro

    Contributor Level 13

    7

    Lawyers agree

    Answered . I agree with my colleagues. An LLC is a business entity that is relatively easy to manage. Although it does not offer full protection for you and your personal assets as you point out, it does insulate the risk generated by your business.

    Depending on the revenue generated by your business and your total personal net worth (bank and brokerage acconts, your primary residence, other investments) you may want to consider combing your LLC with a legal tool that was specifically designed for asset protection purposes: a Family Limited Partnership that is filed in state with strong charging order rules.
    You may want to seek advice with an asset protection attorney.

    Douglass Lodmell is the nations #1 Asset Protection attorney and has clients in all 50 states, protecting over $4... more
  5. Tudor F Capusan

    Contributor Level 8

    6

    Lawyers agree

    Answered . The question is this: Who is doing the deed?
    If it’s the LLC, then no personal liability. If it’s the person acting in a personal capacity, then personal liability.
    So an LLC can be very useful for an only member. That’s because the person can act as an LLC agent (liable) or as a non-agent (not liable).
    Example: I have an LLC for my car repair shop. I buy groceries and mistakenly hit another shopper with an unusually hard bread baguette, the shopper falls and breaks his hand. I am personally liable for the damage. The next day, I negligently repair my client’s car brakes. The client hits a sign post and gets hurt. I am not personally liable.

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