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Reducing Your LLC Liability

LLC managers and members are provided limited liability in a similar fashion to a corporation, but several states are less protective of LLC's. It is possible for a single-member limited liability company to expose themselves to the debts of the LLC in a similar way that a general partner could incur liability for the debts of a limited partnership. This one member/manager must have sufficient personal assets (as established by state law) to meet the foreseeable obligations of the limited liability company.

Liability and the risk of lawsuit are present in every business. If you business defaults on a debt, an employee has a car accident, a customer is injured or a disgruntled ex-employee sues for discrimination, you are at risk. You need to protect your personal wealth from these and other potential business risks and must organize your LLC in a state that insulates the LLC manager from as many forms of personal liability as possible.

Because most states limit the manager's personal liability, they provide outside protection for LLC's managers and members in the same way that a corporation protects its officers, directors, and stockholders. But these protections are available only if you follow the formalities if you wish to be shielded from creditors and lawsuits and for your personal wealth to remain untouchable.

Before forming a corporation you must consider the limited liability company in consultation with a professional advisor. There is a strong possibility that will conclude that the LLC enables you to obtain more protection for your ownership interests than you would as a corporate stockholder. Personal negligence, guaranteed contracts and debts where managers have statutory liability are risk factors that neither the LLC nor corporation will provide protection from.