LLC Answers

While some small businesses are thriving, there are many other ones that are having a difficult time surviving in this current economy.  When the economy slows, both consumers and businesses spend less.  As a result, businesses large and small start to struggle.

For those troubled businesses that operate through an asset protection vehicle like an LLC, the debts and obligations of the business are those of the limited liability company and not the business owners personally.  This general rule applies as long as the business owners did not personally agree to be liable for business obligations.

This is an important concept because … Continue Reading

I have received a lot of inquiries about whether the use of a limited liability company llc shields a person from having to file for personal bankruptcy if the business is failing and has debts it cannot pay.

The answer to this depends on what you have done in your business.  First, if you had decided to form an LLC when you started your business and then transacted all business in the name of the LLC, then the LLC liability limitation provisions protect you from being personally liable for obligations under those business transactions.  For example, if you signed a … Continue Reading

Most limited liability companies are taxed as a pass through. So, I assume this question is based on an LLC that is not taxed as a corporation.

With pass through taxation, the LLC itself as an entity never pays taxes.  However, from an accounting perspective, all the accounting items that are relevant to the business are taken into account.

So, practically, you would take all your revenue, expenses, gains and losses for your business is and determine what the taxable income, if any, or the taxable loss of the business is at the end of the year.  You would apply all the … Continue Reading

Today, a well know legal professor (expert in business organizations law) filed a brief in a landmark Florida case that addresses a fundamental single member LLC matter. If the court agrees with his position, this could mean the definitive end to any charging order protection for the single member LLC.

State LLC laws have never differentiated between a limited liability company that has one member and one that has multiple members when it comes to liability protection.  It is well recognized that every LLC provides a layer of protection stating that owners are not personally liable for business liabilities merely because … Continue Reading

PODCAST:

I recently put together a short audio recording for a group of entrepreneurs that wanted to know if their limited liability company entities needed an LLC Operating Agreement and if so, what this document accomplishes for their LLC busineses.

Listen to this 3 minute recording and you will get these answers and essential information about what you need to properly customize your LLC operating agreement.

 

 LLC Operating Agreement- Why It is Important: Play Now | Play in Popup | Download

This is a pretty popular question asked by existing corporation businesses.  The LLC is a much simpler entity to maintain and it offers a lot more flexibility when it comes to structuring ownership and management of a business.

Some states directly address this question. In these states the laws actually have a method for converting an existing corporation in that state into an LLC.  This is usually done with the preparation and submission of certain filing documents with the state corporation agency.  The specific details are … Continue Reading

An officer is usualy a person appointed with a specific operational rolse in a busines.  Officers generally include President, Secretary and Treasurer but a business can create any officer title role and defined the rights and reponsibilities of the rols.

The LLC laws do not require that a limited liability corporation have LLC officers so they are not strictly required in order to have a valid LLC.

HOWEVER, I alwasy recommend that every LLC have at least the officer roles of President and Secretary.  This is because many third parties are going to look for these traditional officer roles when determining who … Continue Reading

Depends on whether adding the extra layer of manager managed will serve an important business need for your particular circumstances.

One of the helpful features of a company LLC is that you can separate the management of the business from the owners.  This is different from sole proprietorships and general partnerships.

Now, the limited liability company does allow a similar structure and gives limited liability - this is the member managed structure and it means that every member has the authority to manage the day to day of the company and to sign contracts and enter into transactions on behalf of the … Continue Reading

Generally, when this question is asked it is two fold.  One, how are previously purchased equipment or previously incurred debt transferred to a limited liability company when an LLC is created later for a business.

Second, is it possible to not be personally liable for that debt after the transfer?

Question #1:  Yes, you can transfer any assets or debt to your LLC. You transfer assets with a document called a Bill of Sale and you assign debt with an assignment of the debt contract and obligation.  The LLC needs to agree to undertake the debt obligation by having its members formally … Continue Reading

The answer to this depends on how the limited liability company is taxed. If taxed as a partnership/pass through (which is the default taxation for an LLC), owners of an LLC that also work for that limited liability company are generally not seen by the Internal Revenue Services as employees.

Rather, owners are categorized as self employed.  All income earned by the LLC business is seen as self employment income and each member is required to pay and withhold self employment taxes related to that income with the IRS. There is a maximum amount subject to some of the tax.  Now … Continue Reading