How an LLC Protects You from Liability
An LLC limits owners’ liability. LLC legal protection includes the personal liability protection offered by a limited liability company. Limited liability means owners are not personally liable for most LLC debts or lawsuits.
What an LLC Protects You From
Operating as an LLC protects owners from personal liability for wrongdoing in the ordinary course of business. In a lawsuit brought against the LLC, its assets can be used to satisfy the judgment. While owners not responsible won’t be personally liable, the employee could be pursued.
Your LLC won’t protect you if you’re personally sued for negligence or illegal activities. Your personal assets can still be exposed.
Types of Liability and Protection
When you form an LLC, you create an entity separate from the owner. The LLC has its own assets, debts, and liabilities. This provides personal liability protection, so your personal assets are protected against claims or lawsuits.
The main types of liability to know are contractual liability from agreements and tort liability from harm.
LLCs provide liability protection based on the liability’s origin. Creditors pursuing an LLC’s assets can’t go after owners’ assets. This keeps personal properties safe in situations like bankruptcy.