Frequently Asked Questions
How does incorporating an LLC or INC protect the assets of the owner?
When you form an LLC or Corporation (INC), you are creating a new legal entity that is legally legally separate from its owners. This separation provides what is called limited liability protection.
As a general rule, if the LLC can’t pay its debts, the LLC’s creditors can go after the LLC’s bank account and other assets. The owners’ personal assets such as cars, homes and bank accounts are safe. An LLC owner only risks the amount of money he or she has invested in the business.
There are, however, exceptions:
- Owners are still liable for debts that they have personally guaranteed
- Owners may be liable if they have been negligent or committed fraud
- Owners may still be personally responsible for their own conduct that harms third parties
- Owners may be liable for any payroll taxes that your LLC failed to pay to the IRS