I’m an LLC, I’m Protected. Right?

Date: August 9, 2013 Category: Corporate Law

Technology has afforded society wonderful opportunities that allow individuals to find quick answers to what would otherwise be complex questions.  In the practice area of business and corporate law, we have seen the explosion of websites and organizations that offer instant online assistance for the formation of limited liability companies, corporations and partnerships.  While this may seem like a sufficient solution, please remember the old adage, “if it sounds too good to be true, it probably is.”

There are two main reasons to stay away from online resources when forming a business entity to protect the individual member from the liabilities of the business.  The first is that, while they claim the contrary, online resources simply cannot and do not stay current on local and state law.  Each state and community have different rules, regulations and laws governing how business entities are formed and, ultimately, how one must function as a business entity.

Second, while online resources can direct you to and assist you with filing initial documents with the state, it cannot and does not advise you with regard to how a separate business entity is to conduct itself.  Filing Articles of Organization with the appropriate government department is only the first step.  While it is a necessary step, courts will look to a number of things when determining whether you are afforded liability protection by virtue of your business entity.  Once your business entity is formed by filing the Articles of Organization, it is incumbent upon the principals in the business to conduct themselves as though they are a separate business entity.

Online resources simply cannot advise businesses with regard to conduct following the preparation of the initial documents.  It is incumbent upon every business to obtain legal counsel to advise them so as to avoid dangerous and costly missteps.

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