Would the assets of an LLC be protected if the owner of the LLC was sued for a personal issue?

Asked on May 29, 2009 under Business Law, Illinois

Answers:

J.V., Member, New Jersey Bar / FreeAdvice Contributing Attorney

Answered 11 years ago | Contributor

my first advice is that i do not have all of the information and if it is a matter of a lot of money or a risk to the LLC itself you should hire a local attorney to handle this matter. I also would consult with the attorney representing the individual member to ask their professional opinion

In general an LLC is a corporation and the profits through through to the individual. This normally does not mean that an individuals debts flow back to the corporation. I would however not be comfortable commenting on the specifics of this situation without more information as the the LLC itself the operating agreement and the issue at hand

I strongly advise seeking legal representation to ensure protection of the LLC

B. B., Member, New Jersey Bar / FreeAdvice Contributing Attorney

Answered 11 years ago | Contributor

At one level, yes, but it would be slim comfort in some circumstances.

The LLC is a separate legal entity from it's owners, even if it's only one owner.  So the assets wouldn't be directly subject to levy and execution (seizure and sale) on a judgment against the individual owner.

However, the owner's interest in the LLC is itself part of his personal property;  while there usually isn't any stock issued for the LLC, that doesn't change the basic fact that the business itself has to be worth something.

In most states, the LLC wouldn't be transferred to satisfy a judgment, if it could be avoided, and it's often meaningless in the single-owner situation because the owner is the business -- unless there aren't enough other assets.

The details of how this might affect you would depend on all the facts of your situation, and possibly on variations in state law.  You should talk to a lawyer in your area, if you need reliable advice.  One place to look for a qualified attorney is our website, http://attorneypages.com


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