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Corporations and LLCs for protection...

Tustin, CA |

I hear alot about protecting assets with LLCs and Corporations... When people get sued usually their corporation and personal name are named as defendants. So where is the protection if they name you personally as well as your corporation?

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Attorney answers 3


Anybody can name an additional defendant, but it is up to the plaintiff to prove that personal liability is appropriate.

Often the corp/personal suit is based upon an obligation of the corp/LLC which was personally guaranteed by the principal of the business.

NOTE: The response given does not form an attorney-client relationship and it is provided solely as the opinion of the author. It is for informational purposes only under the AVVO terms and conditions. If a legal opinion or representation is desired, please seek independent legal counsel.

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Tom Gimer, Esq. -- licensed in DC and MD -- 202.556.4LAW (4529)


Anyone can sue anyone for anything, but that doesn't mean those lawsuits will be successful. And some transactions, like commercial leases, require that the individuals personally guarantee the leases, so in those cases, there's no protection for personal assets.

But for many transactions, incorporating and forming an LLC provides a "corporate shield" from liability for an individual, as long as the corporate formalities are adhered to, finances and contracts are kept scrupulously separate, etc., so that the "corproate veil" cannot be pierced and "alter ego" allegations can't be proved.

See a business lawyer for help.

Disclaimer: Please note that this answer does not constitute legal advice, and should not be relied on, since each state has different laws, each situation is fact specific, and it is impossible to evaluate a legal problem without a comprehensive consultation and review of all the facts and documents at issue. This answer does not create an attorney-client relationship.
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Assets can be put into a corporation and you can still be sued personally and have all of your assets not in the corporation taken away from you. The traditional point of a corporation is to operate a business and when the business is sued, they cannot reach your personal assets. If this is the case, then listing you as a defendant will do the other party no good because the contract was with the corporation to perform the services, rather than with you.

If, on the other hand, you are putting your own personal assets in a corporation for the purpose of shielding the assets, then this is a different matter. Asset protection planning is a complex field and requires sitting down with a business lawyer to properly structure the asset protection as it is easy to structure them incorrectly and wind up personally liable. If this is what you are intending then I recommend you see a business lawyer to help you set up asset protection structures.

Legal disclaimer: This information is not intended to create an attorney-client relationship and is provided for general informational purposes only pursuant to the community guidelines.