The top priority of business owners choosing to start an LLC is protection against liability. The desire to keep personal family assets and accumulated wealth safely tucked away is the key concern, particularly with the rising number of lawsuits challenging LLCs. Many entrepreneurs start multiple LLCs separating the different business operations into components to further keep
In over three decades representing business owners in creating corporations (and LLCs since Oklahoma adopted their use about 1992), we have never had a single client set up a corporation or an LLC without pointing out their desire to avoid liability. Amazingly, not one of them saw an attorney with a kid needing braces and wanted to donate to the cause!
Avoiding Legal Exposure and Liability
When we form a new LLC for a client, part of the discussion is always how to best avoid certain types of legal exposure and liability. In our view, our job is more about education about LLCs than about the associated preparation of forms and filing documents. We give our customers one-on-one, first-hand training in LLCs and how to run one. We even offer LLC training to folks who want to set up their own LLC themselves. The missing ingredient from most LLC form packages that non-lawyers sell is “knowledge”. The forms are cheap, but so is the accompanying advice.
Our LLC Training Is Not Just For Start Ups
Our LLC training is not limited to merely new LLC start-ups. More and more, we see business owners who start up an LLC with the State, but who have come to recognize they don’t exactly understand what they’re supposed to be doing.
We like these clients because they have come to see the need to learn. They soak up the training we give like a giant sponge. We enjoy seeing their eyes light up as confusion over cloudy aspects gets cleared up. It’s very satisfying to know these clients are leaving armed with a greater and fuller understanding of how to operate their LLC the legal way.
Just like the brand new LLC start-up, the business owner who set up his LLC years earlier comes to the office with questions about LLC maintenance. They usually want to know how to better protect and separate the personal family wealth from the legal liabilities of the company.
Let’s be clear; when we say “family wealth”, it doesn’t mean families with billions of dollars. These are hard-working business owners who have taken into account the equity in their homes, the cars that are either paid off or nearly paid down, money set aside in savings for the kids’ college, and the rainy day fund that holds 4 months of household expense should a bad accident or illness arise.
Your Family Needs Protection
In many respects, the family with $50,000 in assets needs protection more than the family with $50 Million. Of course, if you have $50 Million, you have more to lose. But, you also have the financial resources to hire lawyers and fight. The family with fewer assets can’t afford to fight and they surely can’t afford to lose what they do have.
Personal asset protection is perfectly legal. In our judgment, it’s foolish to think you have nothing to worry about and nothing to lose. You may think, “Well my business is just starting. There’s not anything that I have to lose. I’m up to my neck in debt with the expense of getting the business running.” Well, consider this — are you taking the risk of going into business to get ahead? Do you hope to earn more working for yourself than working for the company you left?
If so, how are you going to feel 3 to 5 years down the road when your business is doing well and an error in the early days creeps up? New entrepreneurs can fail to see only a couple of short years ahead. They are so focused on getting the business out of the red that they risk the entire future on it.
Legal Issues Aren’t Always Immediately Obvious
Who would you think is most likely to make a mistake, a novice getting started or a seasoned veteran of the industry? You may think errors will be immediately apparent, like leaving the milk out on the counter. Later, you come home to find the milk soured from being out of the fridge. You didn’t observe the jug sitting on the cabinet counter when you left home. There are all kinds of little mistakes that aren’t apparent right away. The consequences of the error may not show up months or sometimes years later.
If you later find yourself being held personally accountable for an error the business made years ago, it’s going to be unpleasant! The price may be that your personal assets are used to satisfy the creditor. Entrepreneurs that look to the future recognize they are going to be successful. They are going to make money! They will build and accumulate wealth! Therefore, they don’t want the financial rewards of their work to be taken away by a mistake a long time ago that’s just now coming to light.
It’s not that you aren’t willing to make things right. But, some members of society use oversights for their own personal profit and financial gain. Like the lady who pretends to slip and fall in the grocery store. Maybe she really did slip, but the fall didn’t cause nearly the injuries she claimed in the lawsuit. You would have been quite willing to pay the cost of the doctor check-up, but she wants retirement. If you didn’t pay attention to asset protection before the accident, then you placed you and your family at risk.
Your LLC Should Have Liability Insurance
LLCs are only part of asset protection. You also need insurance. Good safety practices are essential! But in the end, it takes the right combination to keep your business earning profits and your family assets secure from those who may try to over-reach. Setting up an LLC is part of the overall plan.
We help business owners evaluate risks, look at suitable levels of insurance coverage, examine the types of insurance for their situation, form and properly maintain LLCs, and give guidance on legal matters involving day-to-day business.
We’re big believers in the American Dream that everyone can get ahead! It takes hard work, dedication, and knowing how to do things the right way, but you can succeed! All the best to you as you see your dreams happen!