Protect Your Assets: Form an LLC (2/11)

Protect Your Assets: Form an LLC (2/11)


It’s important to set up a legal entity for
your business so your personal assets are not at risk if your business gets sued. In this video, I will explain why. As entrepreneurs, we’re often told to think
big and move fast. Thinking big is important to success, but
moving too fast can often be dangerous, especially in the beginning. Many new entrepreneurs jump into their business
way too quickly, overlook important details, and then they make costly financial and legal
mistakes. These mistakes could seriously jeopardize
the long-term success of your business. The biggest newbie mistake is not setting
up a legal entity for your business. If you don’t create a legal entity, the law
will view your business as a sole proprietorship, if there is one owner, or a partnership, if
there are two or more owners. Both a sole proprietorship and a partnership
leave your personal assets exposed. If a sole proprietorship or partnership is
sued, the owner’s personal assets, like their home, cars, bank accounts, etc., are at risk
of being used to settle business debts and liabilities. What are the options you have for setting
up a legal entity? The most common legal entities that people
know of are LLCs and corporations, but before we get in the details, it’s important to first
understand their foundation. Let’s discuss what a legal entity really is. A legal entity is the same thing as a business
entity, and we’re going to jump back and forth between the two terms in order for this discussion
to make more sense. In the eyes of the law, a business entity
is a legal person. In the eyes of the law, you and I are natural
persons. A natural person is a living, breathing human
being that functions independently and makes decisions on their own. A legal person only functions through the
work and actions of natural persons acting on its behalf. A legal person is considered by law a separate
and distinct ‘person’ from its owners. This separation creates a protective wall
between your assets and the assets of the business. Therefore, this keeps your personal assets
safe, if your business was to be sued. Think of a natural person as a regular human
being, like you and I. Think of a legal person as a corporation like
Microsoft or IBM, or even companies like your local grocery store or bike shop. Although a business entity is not an actual,
living, breathing person, it still shares many of the same rights and responsibilities
as you and I do. It can make money, it can own property, like
real estate, boats, aircraft, enter into contracts and agreements, open bank accounts, it can
sue and be sued, and pay taxes. Basically, the only thing a legal entity can’t
do is vote in an election, run for political office, or do laundry. By setting up a legal entity, you are creating
a business organization that can interface with customers, clients, vendors, and more,
and, most importantly, by setting up a legal entity, you are keeping your personal assets
safe. In the event of a lawsuit, creditors can only
go after the assets of the legal entity, and that’s all they can get; they cannot get to
your personal assets. Personal liability protection is the number
one reason that people set up business entities. The two main types of business entities that
people form are LLCs and corporations. We compare these entities in more details
in our LLC vs Corporation vs Sole Proprietorship video.

16 Replies to “Protect Your Assets: Form an LLC (2/11)”

  1. This may sound like a dumb question, but if I form an LLC, does that mean that my business is registered as "DBA my online boutique name"? Also, would I still need to obtain a business license for running an online boutique LLC?

  2. If I want to open an llc and work in different states what should I know and do to ensure the best decisions?

  3. I understand that an LLC can protect personal assets, but does it work the other way around?? Would my business assets be safe from personal risks/liabilities (debts, lawsuits, etc)?

  4. Hey do u have a email that I can email u how do I apply for LLC for my online business I live in Florida

  5. So say I incorporate a business "Cool Ice Inc." … and now I open a website and I call "Cold Cold Ice" and I refer to the company by that name. What links the two LLC and the "company" and…. who's to say if someone sues me, that I can say "well you should actually sue my LLC" ?

  6. Hey folks, make sure to check the site for most up-to-date information: https://www.llcuniversity.com/llc-asset-protection/. Or select your state and start forming your LLC with our free guides: https://www.llcuniversity.com/

  7. If we move with intent to and do make another state our home, 1) do we need to set up or purchase a new LLC, state respective, 2) do we need to do a transfer process, or 3) can it remain having been formed in one's original home state?

    What conditions call for or make a DBA most appropriate? Is that simply to register the name of your brand or business and is there an effective or vulnerable difference in calling it a brand name or business title ?

    What law dictionaries do you recommend?

    Thanks for addressing any of these.

  8. Would you happen to know any assets protection agencies in Texas. I have multiple properties in different states and I want to proceed with this protection.

  9. should i form multiple LLC's for each property for even more protection, instead of putting multiple properties in 1 LLC?

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