If you form an LL and have an operating agreement , are you automatically protecting your personal assets OR does the operating agreement need to state that ?
Health Care Lawyer
Before I respond to your inquiry, I must state that we have not spoken, I have not reviewed the relevant documents and facts, and I do not represent you. Therefore, my discussion below is not a legal opinion, but is informational only. Finally, my discussion applies only to issues to which Pennsylvania, Delaware, New Jersey or Federal law applies, unless otherwise specified.
That being said, your LLC will not protect your personal assets from liability due to your own actions - for instance, if you are driving on business and cause an accident, the LLC form will not protect you. However, the LLC will protect you against company liability that arises from the conduct of others, or debts of the company that you do not personally guarantee. The Operating Agreement isn't necessary for this protection, BUT it is useful to have one for a number of reasons, and useful to have it state that you are not liable for the company's obligations. Statements in Operating Agreements are not laws, however, and don't always provide the protection you hope for. You should speak with an attorney familiar with LLC issues to go over your concerns.
If you would like to discuss this matter further, please feel free to contact me at the below address(es) or telephone number.
/Christopher E. Ezold/
The Ezold Law Firm, P.C.
Employment, Business and Health Law
One Belmont Avenue, Suite 501
Bala Cynwyd, PA 19004
Answered 8 months ago. Before I respond to your inquiry, I must state that we have not spoken, I have not reviewed the relevant documents and facts, and I do not represent you. Therefore, my discussion below is not a legal opinion, but is informational only. Finally, my discussion applies only to issues to which Pennsylvania, New Jersey or Federal law apply, unless otherwise specified. /Christopher E. Ezold/ The Ezold Law Firm, P.C. One Belmont Avenue, Suite 501 Bala Cynwyd, PA 19004 (610) 660-5585 Cezold@Ezoldlaw.com www.ezoldlaw.com
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An LLC or S Corp provides "limited liability" not total protection from all liability - regardless of whether you have an operating agreement or shareholders agreement (and by the way you should always have an operating agreement or shareholders agreement). That means there are instances where you can still be held personally liable for company debts or actions taken while working for the company.
If you deal directly with the public, you can be held personally liable for your actions or statements. For example, a salesman who misrepresents a product sold by the company can be sued personally for the misrepresentation.
If you co-sign or personally guaranty any company debts, you can be held personally liable for the debts. For example, if you co-sign for a lease for an office or a photocopier, you can be sued personally if the business does not pay.
If this answer was helpful, please mark it as helpful or as a best answer. This answer is for general education purposes only. It neither creates an attorney-client relationship nor provides legal guidance or advice. The answer is based on the limited information provided and the answer might be different had additional information been provided. You should consult an attorney.
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You are protecting your assets from liability for some of the LLC debts and obligations but not things like disputes with other members, payroll taxes, employee wages, environmental issues, criminal liability and so forth. So it is not blanket protection.
No attorney client relationship is established by our answering your question and these answers are meant for purely educational purposes. We are not aware of your specific circumstances and recommend that you hire an attorney to analyze the specifics of your case and applicable law and advise you as to your rights and any time limits that may apply to you within which you must exercise your rights.
2 lawyers agree
First off the assets you are seeking to protect must have been legally transfered or aquired bu the LLC in the name of the LLC. Second, as noted by my learned colleague , the llc does not protect you from actions you take individually such as personally signing a guaranty or fraud.
The forgoing advise is just a general observation and may change dependinfg on your specific facts and circumstances.It should not be relied upon without consultation with an attorney experienced in thiese types of transactions.
I agree with my colleagues. As my colleagues already pointed out, a detailed and well written Operating Agreement will not protect your personal assets from potential lawsuits. The reason you want an experienced business attorney to write an Operating Agreement is that will avoid a lot of misunderstandings and problems in the future by defining for example, the role and responsibilities of each member, how to incorporate or disengage members, how to determine the value of each member’s stake in the LLC, and a large etcetera.
An LLC is an excellent tool to manage a business and to isolate the risk it generates. However, it will not protect you neither your personal assets from lawsuits. A plaintiff may always attempt to hold you personally liable by theories such as negligence or gross negligence.
Depending on the revenue your business generates and the total net worth of your personal assets, you may want to consider combining your LLC with (an)other asset protection tool(s) such as a Family Limited Partnership filed in a state with strong charging order rules such as AZ.
You should schedule a consultation with a business attorney and/or an attorney that has proven expertise in asset protection planning
Douglass Lodmell is the nations #1 Asset Protection attorney and has clients in all 50 states, protecting over $4 Billion in client assets. Answers given by him in this forum do not establish an attorney-client relation. He advises to seek a specialized attorney in the area of your interest for legal representation.