LLC

Note that I am not licensed to practice in your state. This is not intended as legal advice. Please check with an attorney in your state.

An LLC shields your personal assets from lawsuits arising out of the actions of the company. It will not protect you against personal liabilities.

For example, if you had an LLC which was a deli and a customer came into the deli and slipped on water on the floor, they can sue the LLC (the deli) for its assets but they can't come after your personal house. If however, you were driving your personal car and you hit someone, they can sue you personally and attack your house since this was not an action by the LLC or company.

The LLC is a separate legal entity - you can think of it as a separate "person" under the eyes of the law. If you run your business as an LLC, the LLC is the owner, not you. You just work for the LLC. If someone sues the business, the proper entity to sue is the LLC, not you personally.

Some people hold real estate, including their personal residences in an LLC. This can help protect you from anything that may happen inside your house, e.g., a person slipping. It can also help protect your house from being reached by any potential creditors. So, in the scenario mentioned by the attorney above, if you are being personally sued for a car accident, if your house is held in an LLC, your home would be protected.

However, if you do not operate the LLC properly, a potential creditor can "pierce" the LLC shield and go after your personal assets. So although an LLC will provide a level of protection for you, it is not full proof.

I am a Maryland attorney and deal with LLC's regularly. The LLC protects you from personal liability. A creditor will turn to the assets of the LLC, if properly funded, and your own home and other assets are not at risk.

In Maryland you can create your LLC on line, though if you have other members in the LLC you need an operating agreement, and that should be done by an attorney.

LLC's are particularly useful for acquiring and holding real estate. They are good substitutes for corporations. Subchapter S corporations have some potential tax advantages--you should consult with your accountant before deciding between the LLC and the subchapter S corporation.