Hot LLC Facts

Our attorneys at the firm have crafted many Limited Liability Companies over the years for clients who want to protect businesses, rental properties and other assets such as stocks, bonds & cash (yes, LLC’s are used to guard investments and bank accounts against liability. Creditors love to grab your investment and bank accounts they consider it low hanging fruit).

Here are a few extremely important aspects of using an LLC…

Limited liability companies are utilized to guard against both “inside” and “outside” liabilities.

Let’s say you own a rental income property. An inside liability is a liability that originates at the property. This could be a mold issue at the property, a dog on the property bites someone, a balcony collapses and injures someone and on and on.

An outside liability occurs away from the property. This could be a car accident, a liability related to a tax problem or a liability associated with a business. An outside liability can lead to an attack on your assets, including your rental income property.

A properly crafted and maintained limited liability company can guard against both inside and outside liabilities. An important component of your limited liability company is the operating agreement.

An LLC operating agreement is a legal document that outlines the internal workings, structure, and regulations governing the LLC. While not always a legal requirement in every state, having an operating agreement is highly advisable, as it provides clarity and protection for all parties involved.

Let’s take a look at what exactly goes into an operating agreement.

The operating agreement identifies the members of the LLC and their respective ownership percentages. The agreement details whether the LLC will be managed by its members or by appointed managers.

The agreement sets forth the rules for decision-making, voting rights and the duties of the members and managers. Details about how profits and losses will be allocated are also part of the agreement.

The LLC agreement defines how disputes are to be handled and includes buyout provisions and the process for transferring ownership.

An LLC also reinforces the separation between the LLC and members and details the provisions to protect members and managers from personal liability.

The LLC can be tailored for governance, management and ownership structure. You can also amend the LLC as needed to suit the changing strategy of the business.

Without an operating agreement, you may be subject to the default state laws which might not be the best scenario for you in the case of a liability. Your operating agreement also adds clarity to how the business should operate and serves as a binding contract.

At BarthCalderon, LLP, we build customized asset protection provisions into the LLC operating agreements. This adds another layer of protection for our clients.

If you are utilizing a limited liability company for your business, rental property or stocks, bonds & cash then make sure you have a properly designed operating agreement.

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