Does an LLC protect its owners personal assets against liability?

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Does an LLC protect its owners personal assets against liability?

It is a newly opened LLC, no corporate agreement yet, no assets, no returns, has liability insurance, is named in a liability lawsuit. Does the LLC protect its owners and their personal assets in case the suing party will go after the owners of the LLC? Should this LLC be keept open or to close it?

Asked on July 1, 2019 under Business Law, Florida

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 1 year ago | Contributor

The LLC will protect the owners from most liability: it protects them from being liable just because of their ownership of the business or management thereof. It does not protect from liability against them due to their own personal actions or negligence, which could be asserted against them regardless of the LLC. Examples: the LLC has an employee; the employee has a car accident on the job; the owners cannot be personally sued for the employee's accident even though they own the company he was driving for. But if an owner was driving for the company and ran into someone, that owner (but not his/her co-owners) could be sued since he or she was the negligent driver, and negligent drivers can always be sued.
If the LLC is being sued, keep it open; it can be taken as a fraudulent (to the plaintiff or person suing) act to shut down an LLC that is being sued, since it deprives them of course against the LLC. Such an act fraudulent toa  potential creditor (in this case, a "judgment creditor") can deprive you of the LLC's protection, since the law does not let LLCs be used to defraud people whom you owe money.


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