The limited liability company is the best legal entity for a small business but not too long ago, some states did not allow an LLC to be owned by just one person. This did not bode well because solo owned businesses make up a large percentage of all small businesses. State lawmakers soon realized this and so now a single member LLC is allowed in every state.
A sole proprietorship business, which is one operated without the benefit of a legal entity, causes the solo business owner to place everything he owns at risk of loss. This stifles new business growth. The single member LLC is the ideal entity for these solo owned ventures because they are very affordable to form and easy to operated and maintain. Now, solo owners can get the personal asset protection they need.
However, the single member limited liability company must have an official and written single member LLC operating agreement. This is because the liability protection is more vulnerable in a single member LLC.
An LLC is legally a separate person from its owner. So, it is the entity and not the solo owner who is the official provider of the business activity. Often times, a solo entrepreneur will form an LLC and then forget it exists and run the business as if it were a sole proprietorship. It is too easy to do this without other partners to answer to. Lawyers like to challenge this by arguing that a solo owner should be held personally liable because he failed to actually recognize his LLC and use it to run the business. This is contrary to the law but judges sometimes are swayed by this argument.
A smart business owner can take simple but formal steps to make sure that the LLC protection remains in place. One of the most important steps is to prepare and adopt a single member LLC operating agreement for the business. This agreement gives your LLC its own set of rules and processes for running a business. This important formality provides proof to the world and to the judges that you treated the LLC as a separate person and it is the LLC, pursuant to the provisions of the document, that is running your business. You are an agent of the LLC implementing the operational activity.
This is essential business planning. If you ever run into problems or are sued for business activity, the first thing a judge will want to see is your official LLC paperwork and when it was adopted. Without one, he will question whether you have been properly maintaining your LLC and operating your business through this legal entity. Prevent this suspicion from the beginning and ensure your personal liability protection with an official single member LLC operating agreement. - 15478
A sole proprietorship business, which is one operated without the benefit of a legal entity, causes the solo business owner to place everything he owns at risk of loss. This stifles new business growth. The single member LLC is the ideal entity for these solo owned ventures because they are very affordable to form and easy to operated and maintain. Now, solo owners can get the personal asset protection they need.
However, the single member limited liability company must have an official and written single member LLC operating agreement. This is because the liability protection is more vulnerable in a single member LLC.
An LLC is legally a separate person from its owner. So, it is the entity and not the solo owner who is the official provider of the business activity. Often times, a solo entrepreneur will form an LLC and then forget it exists and run the business as if it were a sole proprietorship. It is too easy to do this without other partners to answer to. Lawyers like to challenge this by arguing that a solo owner should be held personally liable because he failed to actually recognize his LLC and use it to run the business. This is contrary to the law but judges sometimes are swayed by this argument.
A smart business owner can take simple but formal steps to make sure that the LLC protection remains in place. One of the most important steps is to prepare and adopt a single member LLC operating agreement for the business. This agreement gives your LLC its own set of rules and processes for running a business. This important formality provides proof to the world and to the judges that you treated the LLC as a separate person and it is the LLC, pursuant to the provisions of the document, that is running your business. You are an agent of the LLC implementing the operational activity.
This is essential business planning. If you ever run into problems or are sued for business activity, the first thing a judge will want to see is your official LLC paperwork and when it was adopted. Without one, he will question whether you have been properly maintaining your LLC and operating your business through this legal entity. Prevent this suspicion from the beginning and ensure your personal liability protection with an official single member LLC operating agreement. - 15478
About the Author:
The greatest defense to defend off challenges on your personal protection is a professional single member llc operating agreement. For an expert single member LLC document package, visit: http://www.TheLLCExpert.com/single_member_llc.htm
