What Is Limited Liability Protection?

Limit liability protection offers business owners protection for their personal assets.

Limited liability protection is a benefit available to businesses that are organized as a Limited Liability Corporation (LLC). Owners, or members, are protected against being personally liable for the debts and obligations of the business.

Protection against Lawsuits

The personal assets of LLC members are protected if the businesses are sued. This means that the courts may attach the assets of the corporation only, not the home equity, investments or other assets owned by the owners and their families.

Protection Against Bankruptcy

In case of bankruptcy, courts look to find all available assets to pay debts. Because of the LLC business structure, the courts cannot consider the personal home equity or investments of the owners as available assets.

Taxation Flexibility

Tax flexibility is a little known benefit of LLC formation. Owners have the flexibility of deciding how the income earned by the LLC will be taxed. For example, the IRS does not consider the LLC as a taxable entity. Therefore, LLC owners can decide whether to be taxed as a sole proprietor, partnership or corporation, according to LLCsExplained.com.

References

• The LLC Expert: What are the Benefits of an LLC?
• LLCs Explained: Tax Accounting for Limited Liability Companies
• The 'Lectric Law Library: Limited Liability Partnerships & Limited Liability Limited Partnerships