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Comment by jforman | Hacker News Reader

An LLC may be easy to set up, but maintaining the personal liability shield is non-trivial. I'd recommend getting advice from a lawyer no matter the route taken.

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Please expand on this. It's quite a bold statement to make without giving at least basic details about what non-trivial issues you are referring to.

With liability protection you want two forms of protection. The Founder(s) needs to be personally protected from the company liabilities, and you want to company to remain protected from the liabilities of the Founder(s).

For example if you form a "single member" LLC, or a LLC with 1 owner, because LLCs are partnerships Court's will not protect the LLC from the single Owner's liabilities because there are no partners to justify protecting the business. So if the Owner has debts, the creditors can go after the the LLC as a asset to cover the debt.

So while anyone can set up an LLC easily on their own, as in this hypothetical it would have been worth the money to talk to an attorney before forming and have the lawyer advise to and another second owner and receive protection with the LLC or form a corporation instead of an LLC as a single owner.

Wyoming offers a lucrative incorporation package, you dont even have to live there.

http://wyomingcompany.com/wyoming-corporations/

'because LLCs are partnerships' huh? Single Owner LLCs exist specifically to protect the personal assets of a owner from the creditors of the LLC, IFF the LLC was the signatory on the debt, rather than the owner (if you have to provide an SSN to secure the debt, it's probably in your name personally, rather than in the companies name). Courts will protect the owner, as long as the owner keeps their personal finances and the company finances (and activities) entirely separate - pay a salary to another account, etc. If there's any mixing, you get screwed. C-Corp/S-Corp doesn't change any of that at all from a single-owner perspective though...

I think you are misreading what he wrote. With a single owner LLC, the owner is protected from LLC liability, but the LLC is not protected from owner liability. Search for "LLC charging order protection" for more info.

Thank you so much, I posted like 5 times about this nuanced point in the law, everyone jumped all over it down to calling it legal malpractice. You seem to be the only person to make the distinction between: Company liable for Owner Debts vs. Owner Liable for company debts

I acknowledged your point in my post, a single member LLC Owner is protected from the liabilities/debts of the LLC. Consider the distinction I made that you missed - where the single member LLC lacks protection - the LLC can be liable for the personal debt/judgments of the single member LLC Owner.

In contrast, multi-member LLCs and Corporations (C or S; single shareholder or multiple shareholders) are protected from the personal liabilities/debts of Owners. In practice, if Person A owned Google Stock A's debtors can not go after Google and Google's assets to satisfy the debts; however, if A is also the Owner of a single member LLC those same debtors CAN get a charging Order, Economic Interest, or foreclose (take ownership) of the single member LLC and/or its assets.

See: Olmstead v. Federal Trade Commission http://www.floridasupremecourt.org/decisions/2010/sc08-1009.....

IANAL, but some basic details:

There needs to be a strict separation between the corporation and the people behind the corporation. As part of this, the LLC's finances need to be kept rigorously firewalled from personal finances — never pay a corporate bill from your own pocket, for example, or vice-versa.

You also need to follow the formalities of a corporation by keeping formal records (minutes, shareholder acts, etc.).

If you fail to do either of these things you, in addition to the LLC, can be sued, and you can lose personal assets. It's called 'piercing the corporate veil'. A great run-down is here:

http://www.nolo.com/legal-encyclopedia/personal-liability-pi...

> There needs to be a strict separation between the corporation and the people behind the corporation. As part of this, the LLC's finances need to be kept rigorously firewalled from personal finances — never pay a corporate bill from your own pocket, for example, or vice-versa.

This is true about all formal business structures. They should always be separate from your personal finances.

> You also need to follow the formalities of a corporation by keeping formal records (minutes, shareholder acts, etc.).

Not true. LLCs do not require the record keeping that corps require. The only formal records you need to keep are contracts / member & manager agreements.

> This is true about all formal business structures. They should always be separate from your personal finances.

This is more than "should." In an LLC, co-mingling finances can expose you to personal liability, which can result in personal financial disaster if you get sued.

> LLCs do not require the record keeping that corps require

We're both sort-of wrong on this one: the LLC record-keeping burden is far lower than a corporation, but the burden is not strictly limited to your list:

http://www.nolo.com/legal-encyclopedia/llc-record-keeping-ru...

...in general, the law is much more complicated than one would expect. If you want to be safe, you should either be spending time reading NOLO's documentation or money paying a lawyer.

What do you mean by this?

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