If I start an LLC, will my business be protected from my personal debt or will they come after what my business brings in?

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If I start an LLC, will my business be protected from my personal debt or will they come after what my business brings in?

I want to start my own business but I am in a lot of personal credit card debt

and I also owe stae unemployment money. I’m afraid that if I start a business,

creditors/IRS will come after me for what I owe. Once I start making money I

will of course start paying off what I owe.

Asked on March 27, 2018 under Business Law, New Jersey

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 4 years ago | Contributor

The business will not be protected from your personal debt for two reasons:
1) The business is an asset of yours (something you own with, presumably, value). Your creditors can go after your interest in your business the same way they can after your interest in other assets you own, like your home or a car.
2) Since you will be doing this *while* you owe a great deal of money, anything you put into the business (investments into the business; property your give to or buy for the business to use, like computers or office equipment; operational funds you provide; etc.) could be seen as a transfer made to defraud (hide assets from) creditors. However, the law does not let you transfer money or assets while in debt to keep it away from creditors; creditors can bring legal actions to reverse those transactions and pull the money or assets back, so they can get at them.


IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although AttorneyPages.com has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

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