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Protecting Your Personal Assets with an LLC Limited liability companies (LLCs) offer the complete form of this protection out of all the different types of business. An LLC protects you from the legal problems that are bound to arise in business. For example, if your business gets sued or goes bankrupt, your assets (home, car, investments, etc.) and other businesses (if they are in different LLCs) cannot be taken away. Only the assets of the LLC that got sued are in danger. The protection from liability that comes with an LLC could be better. For example, if you don't do certain things to show and keep showing that your LLC is not just an extension of yourself (your alter ego), then a court can ignore the LLC and let a plaintiff or creditor get access to your assets. It's called "piercing the veil of liability protection" when this happens. If you want to protect your assets, you must establish an LLC as soon as you start your business. Note: Professional limited liability companies (PLLCs) are the only ones that don't get the standard protections of LLCs. This is because being a licensed professional means taking personal responsibility. By making your new business an LLC or putting your current business in an LLC, you give your company the best insurance policy at the best price. A business insurance policy can still keep the company from paying for its mistakes. But they only work in cases of product or service liability and don't usually pay out to unhappy creditors if the company can't pay its debts. Also, insurance companies aren't always sure if they'll pay out, but the LLC is pretty safe. Here's the last tip: LLCs are so hard to sue that lawyers often choose to negotiate a settlement or, better yet, don't sue LLCs at all to save time and money. An LLC protects you from being held personally responsible for small acts of carelessness, but it doesn't help you if you do something illegal or dishonest on purpose. Also, the LLC does offer some protection from the IRS and other government creditors, with one big exception: As a member or manager of an LLC, if payroll taxes aren't paid, you could be held responsible. So, if you take taxes out of your employees' paychecks and don't pay the tax, you risk losing your own money.