- quote -

And it may very well be, that the very simplicity of the LLC
itself lends itself to lax recordkeeping and failure to
document. After all, lawyers themselves tout the LLC
concept as being the epitome of simplicity.

Next time her employer happens to call me for tax advice,
I'll just have to ask him.

ChEAr$,
Harlan

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2005) - All rights reserved. > << ================================================== ===== >

- quote -

I suppose it depends on the laws of your specific state.
But from what I know of LLC's, the liability is no different
from corporations.

What may be different, though, is what you need to do to
maintain that limited liability. If you don't follow the
rules, you may not get the benefits

Stu

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2005) - All rights reserved. > << ================================================== ===== >

- quote -

No I can't. Just from a client who works for a lawyer over
in Columbus, GA. She is not a lawyer, so she couldn't
explain it, only that she had heard a conversation between
the two partners to this effect.

ChEAr$,
Harlan Lunsford EA n LA

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2005) - All rights reserved. > << ================================================== ===== >

- quote -

Sorry, I left some important info out even though I assume
most know what I was talking about. With regards to the S/E
issue, the shareholder/employee would be part of an
S-Corporation.

Josh

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2005) - All rights reserved. > << ================================================== ===== >

- quote -

can you provide any specifics on this? thanks

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2005) - All rights reserved. > << ================================================== ===== >

"R" <cma_cpa[at]hotmail.com> wrote:

- quote -

In my experience most small single owner corporations do not
treat the business as a corp. They commingle funds, draw
little or no salary, pay personal expenses directly from the
corporate account, do not keep accurate corporate records,
and often do not even take the time to actually "issue"
stock certificates to themselves.. These alone are enough
for any court to pierce the veil of the corporation,
offering no legal protection.

On the other hand, if a corporation is strictly operated as
a corp. and the action that caused the suit is not a direct
act of fraud or negligence by the sole shareholder, he/she
would probably be able to shield his personal assets
(although the company is often thier largest asset). If the
source of the suit is an employee or product liability the
corp. should have insurance to protect against those
liabilities.

A

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2005) - All rights reserved. > << ================================================== ===== >

"R" <cma_cpa[at]hotmail.com> wrote:

- quote -

a bit of gooling and cut and paste for you:

"The SMLLC offers corporate-style liability protection to
its owner, thus protecting the owner's personal assets from
liabilities pertaining to the SMLLC's business or investment
operations. However, no form of entity protects an owner
from liabilities brought about by his professional
malpractice or tortuous acts (e.g., personal injury)
inflicted on someone else."

"Rental Real Estate Example

For example, lets assume one owns three separate pieces of
rental property. Each property has 10 separate units. The
owners could create 3 separate SMLLCs with each property
owned by a different SMLLC. Lets assume the entities are
called Smith Properties I, LLC, Smith Properties II, LLC,
and Smith Properties III, limited liability company. All
contacts are between the Limited Liability Company and the
tenant. What does this do? First, any liabilities from the
properties cannot attach themselves the personal assets of
the owner. Therefore, a tenant can only pursue a lawsuit
against the SMLLC rather than the owner. A lawsuit naming
the owner should be summarily dismissed. In addition, the
liabilities from each property cannot attached themselves to
the property in the other two SMLLCs. In others words, a
judgment against Smith Properies I in an amount of one
million dollars is only good against that Limited Liability
Company. The other properties are protected. Finally, for
tax purposes, all the properties are owned by the owner and
are listed on his IRS Form 1040.

Small Business Example

Many individuals are owners of small business. As previously
noted, if ownership is in the name of the owner, there is no
liability protection. Thus, any judgment against the
business attaches itself to the personal assets of the
owner. There is no reason to assume such a risk. A sole
proprietor can organize the business in the name of the
Limited Liability Company. For tax purposes it is a non
entity or sole proprietorship. But for liability protection
purposes, creditors can reach and attach the personal assets
of the owner. The owner shields his personal assets from the
debts, obligations and liabilities of the company."

not to mention limiting liability to creditors, should your
LLC business hit the skids.

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2005) - All rights reserved. > << ================================================== ===== >

- quote -

Two benefits I can think of (although one doesn't have to do
with liability protection, but still important):

1) Protection from creditors. However, most creditors would
cover their bases by making the member personally guarantee
the debt.

2) S/E tax. Sole prop will pay S/E tax on all earnings and,
due to lack of guidance, SMLLC probably will pay S/E tax on
all earnings. However, pay a shareholder/employee a
reasonable wage, and the remaining income is not subject to
the S/E tax.

Josh

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2005) - All rights reserved. > << ================================================== ===== >

R wrote:

(snipped)

- quote -

Exactly the advice I give clients who want to get in on the
latest thing recommended by lawyers, the LLC. The advice
boils down to suggesting the KISS principal; "keep it
simple, stupid!"

If one truly does have need of limited liability, then by
all means form either the LLC or the corporation, even
though, I am now hearing that legal beagles are realizing on
basis of developed case law now, since the last 12 years of
llc's, that the LLC will not do it all, and that many times
a true corporation is best thing.

ChEAr$,
Harlan Lunsford, EA n LA

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2005) - All rights reserved. > << ================================================== ===== >

R wrote:

- quote -

While noting that this issue is a bit off topic, and also
noting that I am not an attorney, I agree with your premise.
Note, for example, that merely having an LLC will not
reimburse you for the costs of defending a suit, even if you
"win." On the other hand, an insurance policy most likely
will cover your costs of defense. So, you probably need to
have the insurance REGARDLESS of whether you have an LLC.

Actually, I've presented this question to an attorney friend
many, many times. His response continues to be, "Who knows,
but having an LLC would at least create some additional
hoops that a plaintiff might have to jump through." So,
armed with that resounding endorsement, I wouldn't lose the
phone number of my insurance agent. <grin
MTW

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2005) - All rights reserved. > << ================================================== ===== >

This message may be a little off the group's topic, but
there are a lot of sharp minds that contribute to this
group. So, I would like to hear your input, thoughts, etc.
on the following statement. If you are a tort attorney,
your professional input would be especially appreciated.

I have heard everybody and their cousin talk about
incorporating or forming an LLC, LLP, etc. for "protection
of their personal assets." This is all fine if your business
has more than one principal. I understand the value of such
an entity if shareholder / partner A goes out and commits a
libelous act, the business entity will protect the personal
assets of shareholder / partner B.

But I don't see the value of a single-employee / one person
corporation, LLC, etc. Why? If the single owner goes out
and commits the same libelous act, and the plaintiff sues,
the plaintiff's lawyer will simply name the corporation /
LLC AND the owner in the lawsuit. How many tort lawsuits
only name one defendant? Very few, if any. For example, if
the driver of a delivery truck causes an auto accident, the
company, the company's president, the company's manager of
maintenance, the driver, and anyone else that might have
insurance is named as defendants in the lawsuit. For good
measure, the truck manufacturer or malfunctioning auto
part's manufacturer might be included too.

Simply put, if a single owner is named in a lawsuit, the
owner as well as the business entity will be named as
defendants. For the cost of incorporating and annual
regulatory filings, wouldn't a single owner be better off
buying a large liability insurance policy? In what type of
scenario would a single owner benefit from, and really be
personally protected, by a corporation or LLC entity?

Thanks in advance for your insight and thoughts,
Russell Tuncap, CMA, CPA
www.tuncap.com

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2005) - All rights reserved. > << ================================================== ===== >