subject: Top 5 Llc Mistakes And Their Solutions [print this page] A limited liability company is a hybrid form of business which incorporates some characteristics of both partnership and corporate business structure. It has been used as an excellent way of protecting personal assets from apartment rental property liability. Further, state governments also support it in order to get more investment from these companies. As they invest heavily therefore it helps in improving the economy and provides great benefits to the society.
Corporation and LLC laws are formulated in such a way that they save individual investors from any personal liability. This helps them in insuring the good and welfare of society. It is very important that businesses are strictly run according to LLC statutes in order to gain the protective shield provided by LLC. It is very important that individuals take advice and help from an experienced LLC lawyer before they try to set up their own LLC. Going through lawyer reviews before selecting one is also very important for a successful business attempt.
Here are 5 most prominent mistakes that individual make while setting up an LLC or while taking help from a lawyer in the same regard :
#1. Most of the Individuals wait to form an LLC until an injury is claimed by a tenant.
Your personal assets are not protected if you form the LLC after a claim has been made or a legal action has been taken against. This is a very common situation where most of the individuals rush into the process or LLC formation after legal action has been taken against them. It is usually too late at this point.
#2. The rental property is not properly transferred into the limited liability company during its formation.
Only those properties that are transferred into the LLC and belong to it are protected by asset protection feature of LLC.A Grant Deed or Quitclaim Deed is very important in order to make sure that a property is protected under LLC. Further, these documents must be properly written and legally notarized.
#3. Individuals tend to continue the use of their personal bank account instead of LLC bank account even after the LLC is formed.
Many people tend to use their personal accounts even after they have formed the LLC. It is very important that all the income generated and expenses made in the LLC are transacted through an LLC bank account. This will be very helpful in case of lawsuits as judges tend to invalidate the LLC in case the personal expenses cannot be separated from the LLC money.
#4. Its a huge mistake if you form a corporation for your rental property rather than an LLC.
Many individuals make the mistake of forming a corporation for their rental property. This usually happens due to lack of proper legal guidance and attempts to save money. Corporation is not able to provide as much asset protection as usually required in this type of business. On top of that, corporations require more formalities, tax fillings and legal procedures than LLC.
#5. Clients forget to transfer their LLC into their living trust.
Individuals who have formed an LLC and also have a living trust must transfer their LLC into their trust. Those properties that are not transferred into the trust had to go through probate rather than getting transferred to the desired heirs according to the trust documents.
These are some of the most prominent mistakes that individuals make in case of LLC. I hope that you wont be making these mistakes now you know about them now.
