Blaine Burch’s Post

Transcript

Welcome to BHR Law Group. I'm Blaine Burch and I'm a certified specialist in estate planning, trust, and probate law. Today we're going to talk about how an LLC or a limited liability company can protect you. An LLC protects you from liability for the assets that it holds, But there's a couple of different types of liability we have to talk about. There's inside liability and outside liability. So first, let's talk about inside liability. Inside liability is a claim that comes against the asset that is in the LLC. So let's say you're running a company out of an LLC. If there's a claim against that company, that's an inside liability. And the LLC protects the owners of the LLC by limiting the liability to the assets that are held in the LLC. So it protects the owners private assets from being liable to any claims from people that bring a claim against the company. The other type of liability is outside liability. This is when a claim is brought against one of the owners individually and outside liability protect or an LLC can protect against outside liability because the courts have claimed that the other owners of the LLC need to be protected and so a judgment holder or a claimant cannot enter into the LLC and attack the assets inside the LLC. Because that would affect the other owners. What they can do is get what's called a charging order, which means that if the LLC makes a distribution out to the owners, there's a lien against that distribution to the affected or the defendant owner. There there can be a problem though, when the LLC is what we call a single member LLC, which means there's only one owner. The argument against protecting the other owners kind of goes away in that situation. So there's many states, including California, that allow for other remedies or allow for the claimant or judgment holder to enter into the LLC and attack the assets inside the LLC when it's just a single member LLC. However, the good news is there are states that are more protective and these states have statutes that limit the remedies against an LLC to a charging order. Some of these are like Nevada, Delaware, and Wyoming. So I would suggest when you look at creating an LLC creating in one of those jurisdictions, knowing how an LLC can protect you against liability is a really important part of any sort of corporate planning or estate planning. So you should definitely talk to your. State planning attorney, your business attorney in your CPA about any sort of LLC that you're looking to create.