When you are devising a long-term financial strategy you may be interested in asset protection. One option that is available to that end is the creation of a limited liability company or LLC. The LLC is kind of a cross between a corporation and a partnership or sole proprietorship. The owners of an LLC are called “members,” and there is such a thing as a single member LLC.
The assets that are personally owned by the members of a limited liability company are protected from creditors and claimants seeking redress from the LLC. This is where the asset protection lies. However, the LLC itself can be litigated against so assets owned by the LLC are not protected on that level.
In addition to this, if the LLC is making cash distributions to the members, these can indeed be subject to charging liens, so the creation of a LLC is not a cure-all. There are those who try to get around this by having the LLC make payments that benefit the members without making the payments directly to them. For example, the LLC could make a mortgage payment for a member.
This is something you may want to refrain from because the onus would be on the LLC member or members to prove that this entity was in fact separate from his or her personal financial identity. Creditors often successfully argue that the limited liability company is actually just an extension of the member or members and not a legally viable entity in its own right. Having the LLC pay your bills gives the creditors ammunition when they make this argument.
Limited liability companies can be a good choice for asset protection under certain circumstances. You just have to go about things in the right way and create clear separation between your own personal finances and that of the LLC. To learn more about LLCs and asset protection, simply take a moment to arrange for a consultation with an experienced Atlanta asset protection planning attorney.
Pyke & Associates, P.C. is a member of the American Academy of Estate Planning Attorneys.