Forming a Limited Liability Corporation or LLC is an important way to protect your personal assets in the event that creditors attempt to collect from your business. This protection of your personal assets is not necessarily absolute. This makes it important for you as the owner of the LLC to take steps to separate your personal assets from the assets of your LLC.
Obtain LLC Insurance
If your LLC is sued, in some cases you can also be personally sued for wrongdoing. This means that your personal assets remain unprotected. However, if you have liability insurance for both your LLC and yourself, you can protect your own assets in the case of a lawsuit.
Maintain your LLC as an Independent Entity
If you mix personal assets with your business assets, you can, in some cases, be held personally liable for what happens with your LLC. To prevent this, you should keep records of your LLC’s finances completely separate from any records of your own finances. Any paperwork such as contracts and invoices should have the LLC’s name, not your own name, on them. This is a way to maintain the business as an independent entity and to let others know that they are dealing with a business and not you personally.
Keep Just Enough Money in the Company
In general, if your LLC is sued, a creditor can only collect any funds held by the LLC, not by you personally. It makes sense, then, to keep only the funds that you absolutely need in the LLC. Any extra funds can be paid out from the LLC to you as the owner.
Establish Credit for Your LLC
In many cases individuals end up financially responsible for their LLCs because they personally guarantee financing. To avoid this, establish credit for the LLC personally. In the event that the LLC defaults or files bankruptcy, this is a way to protect yourself from being personally responsible and to protect your own assets.
You want to be able to focus on the running of your business, not the paperwork that goes along with having an LLC. For assistance forming your LLC, contact GovDocFiling here.