Asset protection in LLC or Corp

Huleo

New Member
Jurisdiction
Kansas
We have a couple small business ventures coming up. We intend to either file for new LLCs or Scorps. However, I recall asking years ago about personal asset protection and a few people basically said there is no protection. That seems to nullify any reason to create a corp!

One business will be making water monitoring sensors. This business would be operated from home.
Another will be excavation services. We already own the equipment under our farm and I would like to rent the equipment to the LLC for the "for profit services".

In both cases we are sort of merging the lines of personal and business due to the home based businesses. I knows tons of businesses do this like plumbing, hvac, etc. I just need to ensure my farm, home, and other personal assets could not be subject to any liability claims.
 
Your number one protection is going to be appropriate insurance with sufficient limits.

Beyond that, you should sit down with a local professional (or several professionals) to discuss appropriate steps to take.
 
However, I recall asking years ago about personal asset protection and a few people basically said there is no protection.

You recall asking whom? Are any of these "few people" attorneys or people who have any concept of corporate law?

One business will be making water monitoring sensors. This business would be operated from home.

From your home? How are you going to manufacturer water monitoring sensors (whatever that exactly means) from your home?

Another will be excavation services. We already own the equipment under our farm

Who are "we"? You and your spouse? Someone else? What does "own the equipment under [your] farm" mean? Do you have some sort of subterranean equipment storage facility underneath your farm?

I just need to ensure my farm, home, and other personal assets could not be subject to any liability claims.

The best thing for you to do is consult with a local business attorney and a commercial insurance agent.
 
However, I recall asking years ago about personal asset protection and a few people basically said there is no protection. That seems to nullify any reason to create a corp!

LLCs and corporations do offer some limited liability protection. That's one reason why they can be very useful when conducting business. But it doesn't protect the business owners against liability for everything. First, you are liable for your own acts of negligence that harm others, even if what you did was for the corporation or LLC (and the LLC/corporation would also be liable in addition to you). This is why you really need to have good insurance that covers acts of negligence. Second, major creditors and suppliers of your small LLC/corporation are going to know about the limited liability of LLCs and corporations and will have you sign personal guarantees for the debts you incur. You are of course personally liable for business debts that you guarantee. Next, owners/officers/members of a corporation or LLC may be personally liable by statute for certain debts not withstanding the limited liability protection. For example, certain taxes owed by the business may also end up being personal liabilities of the shareholders, officers, or members, too. Finally, you have to take care to appropriately capitalize the business and run it the right way to ensure that a creditor of the business won't succeed in making you personally liable by piercing the corporate veil.

I agree with the others that it would be a good idea for you to consult a business attorney about your plans for advice on the right way to structure it. It would be a good idea to see a tax attorney as well.
 
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