ASSET PROTECTION 101: WHAT IS AN LLC? NELLIE AKALP
So what is an LLC? It’s a hybrid of a partnership and corporation. It’s considered to be a “Separate Legal Entity.”
In fact, a properly formed and maintained LLC will have both a state-certified filing date and an IRS-issued Tax
ID Number (similar to an individual’s birth date and social security number).
The following example illustrates the LLC’s liability protection. Let’s say you have XYZ LLC that holds title to a
vacation rental property. A guest falls from the balcony and the court awards a multi-million dollar judgment to
the plaintiff. The defendant in this case is XYZ LLC, not you. And the judgment can be collected only from XYZ
LLC’s assets, and not from your own personal assets. You may end up losing your investment in the property
owned by XYZ LLC, but your other properties, your savings account, and any other investments are all safe.
Setting up an LLC is a relatively easy task. You can either contact your attorney or use a legal document filing
service to file the necessary forms with your state’s Secretary of State.
Of course, once you have established an LLC, your work isn’t done. You’ll need to sign a deed transferring the
property to the LLC, and then record the deed in the county where the property is located. This may sound like
an obvious step, but do not overlook it. If you never actually deed the property to the LLC, you (as an individual)
are still considered the owner and will be the defen dant in any lawsuit.
Take your legal filings seriously. The old adage is true: an ounce of prevention is worth a pound of cure.
An LLC essentially forms a wall that shields individual owners
from personal liability
Nellie Akalp
Nellie Akalp is a passionate entrepreneur, small business advocate and mother of four. As CEO
of CorpNet.com, a legal document preparation filing service, Nellie helps entrepreneurs start a
business, Incorporate, Form an LLC, set up Sole Proprietorships (DBAs) and maintain a
business in compliance with state filing requirements for a new or existing business.