Frequently Asked Questions
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Protecting your assets
If your LLC is sued then the money held in the bank by the LLC can be used to pay the creditor, but your personal assets cannot. (Exceptions may apply if you are personally negligent or have committed fraud).
To limit the amount that the LLC may have to pay to a potential creditor, it may make sense to keep as little money as possible in the company.
There are a couple of important limitations on this, however.
- If you already owe a creditor and transfer money out of the company, the transaction may be regarded as a fraudulent transfer.
- If you don’t keep enough money in the company to meet its expenses, a court may hold you personally liable for operating whilst insolvent (running up debts which you have no ability to pay). This is often seen as a direct attempt to defraud business creditors.