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Business Small Business The Importance of the Single Member LLC Operating Agreement
Business Small Business The Importance of the Single Member LLC Operating Agreement
| The Importance of the Single Member LLC Operating Agreement |
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| Written by Amyli McDaniel |
| Saturday, 31 January 2009 09:03 |
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Solo owned businesses make up the largest percentage of business in the US. However, when the LLC laws were first passed, some states did not allow for a single owner to get the protections of this legal entity. This did not make sense and so now all states allow a limited liability company to be owned by just one member. Solo owners need protection just as much as others. A sole proprietorship business, which is one operated without the benefit of a legal entity, causes the solo business owner to place everything he owns at risk of loss. This stifles new business growth. The single member LLC is the ideal entity for these solo owned ventures because they are very affordable to form and easy to operated and maintain. Now, solo owners can get the personal asset protection they need. However, the single member limited liability company must have an official and written single member LLC operating agreement. This is because the liability protection is more vulnerable in a single member LLC. An LLC is legally a separate person from its owner. So, it is the entity and not the solo owner who is the official provider of the business activity. Often times, a solo entrepreneur will form an LLC and then forget it exists and run the business as if it were a sole proprietorship. It is too easy to do this without other partners to answer to. Lawyers like to challenge this by arguing that a solo owner should be held personally liable because he failed to actually recognize his LLC and use it to run the business. This is contrary to the law but judges sometimes are swayed by this argument. Be aware that there are things you can do to prevent any challenge to your liability protection. The very first thing is to execute and formally approve a single member LLC operating agreement. This document gives your LLC a personality by putting in place a set of features and rules for which your business will be operated. By putting this agreement in place, you are creating solid evidence of your acknowledgment that it is the LLC and not you personally that is operating the business. You see, if you ever run into business problems, it should be made clear that it is your LLC that is responsible for your business. The first think a court will order and lawyers will want to see is the official LLC documents. Second, they will want to know when they were adopted. By having the single member LLC operating agreement in place from the beginning, you will ward off claims. Do this so you do not have to worry about lawyers trying to convince judges that you should be personally liable for business debts. About the Author: The best defense to defend off attacks on your personal protection is a professional single member llc operating agreement. For an expert single member LLC document package, visit: http://www.TheLLCExpert.com/single_member_llc.htm Kindly provided by MoneyHunter.org You are welcome to use this article on your own website, if you include the link just before this text. |
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