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From my research, if a LLC has a single person behind it, the protection offered is lower. "In many cases, the court will agree and the single member becomes pe

by jusob 10y ago

From my research, if a LLC has a single person behind it, the protection offered is lower. "In many cases, the court will agree and the single member becomes personally liable for the business debts." (http://markjkohler.com/are-single-member-llcs-worth-it/#sthash.aiE67vEu.dpuf http://markjkohler.com/are-single-member-llcs-worth-it/#stha...)

tedmiston 10y ago
I'm not so sure about this. The whole point of forming the SMLLC is protection and liability. It's difficult to generalize some of the author's claims. IMO this needs a citation: > In such situations, the plaintiff in a lawsuit against the LLC will ask the judge to set aside the asset protection associated with the company by claiming the company is a sham since it has no records and no Operating Agreement. In many cases, the court will agree and the single member [that’s you] becomes personally liable for the business debts. That said, I am curious to hear more about whether adding a minimal second member, such as a friend paid $1/year makes any difference. Disclosure: Single-member LLC owner. In my case, it's a purely software development company, so assets are minimal.
TaylorGood 10y ago
This. If joshuaheard would elaborate on this long-running debate
- joshuaheard 10y ago
  I don't think the number of people matters much. The key to upholding the liability protection (and not "piercing the corporate veil" - google it) is to treat the company as a separate entity, not your personal slush fund. That means only pay business expenses from the corporate bank account (have a separate corporate bank account), no personal expenses from the business account, and no business expenses from the personal account . If you must use the personal account for business expenses, have the company reimburse you, but try not to make many transfers back and forth. The other most common pitfall (and there are many) is undercapitalization. Make sure your company has enough assets to do business. I would put in at least $10k to start, and then add $5k when you get low. $1k would be the minimum if you are on a budget, I think. Only pull out cash when necessary. Conform to corporate formalities, ie keep your taxes and fees paid, and file annual information statements, or whatever your state requires. When do you incorporate? It's a judgment call. I have a side project I have been working on for 3 years and I haven't incorporated. I would think when you start having significant public contact and sales, and you think it will become a permanent business, it might become worth the expense. The other is if you think it has significant value and/or there are multiple founders. You could also start with a contract and then incorporate down the road. There are lots of ways to go and plenty of material on this subject.

by jusob 10y ago

tedmiston 10y ago

I'm not so sure about this. The whole point of forming the SMLLC is protection and liability. It's difficult to generalize some of the author's claims. IMO this needs a citation: > In such situations, the plaintiff in a lawsuit against the LLC will ask the judge to set aside the asset protection associated with the company by claiming the company is a sham since it has no records and no Operating Agreement. In many cases, the court will agree and the single member [that’s you] becomes personally liable for the business debts. That said, I am curious to hear more about whether adding a minimal second member, such as a friend paid $1/year makes any difference. Disclosure: Single-member LLC owner. In my case, it's a purely software development company, so assets are minimal.

TaylorGood 10y ago

This. If joshuaheard would elaborate on this long-running debate

joshuaheard 10y ago
I don't think the number of people matters much. The key to upholding the liability protection (and not "piercing the corporate veil" - google it) is to treat the company as a separate entity, not your personal slush fund. That means only pay business expenses from the corporate bank account (have a separate corporate bank account), no personal expenses from the business account, and no business expenses from the personal account . If you must use the personal account for business expenses, have the company reimburse you, but try not to make many transfers back and forth. The other most common pitfall (and there are many) is undercapitalization. Make sure your company has enough assets to do business. I would put in at least $10k to start, and then add $5k when you get low. $1k would be the minimum if you are on a budget, I think. Only pull out cash when necessary. Conform to corporate formalities, ie keep your taxes and fees paid, and file annual information statements, or whatever your state requires. When do you incorporate? It's a judgment call. I have a side project I have been working on for 3 years and I haven't incorporated. I would think when you start having significant public contact and sales, and you think it will become a permanent business, it might become worth the expense. The other is if you think it has significant value and/or there are multiple founders. You could also start with a contract and then incorporate down the road. There are lots of ways to go and plenty of material on this subject.