Steps to Ensure Limited Liability in Your LLC

20 years of litigation
experience in Michigan

Steps to Ensure Limited Liability in Your LLC

Steps to Ensure Limited Liability in Your LLC

You’ve established your new business as an LLC, or Limited Liability Corporation, because you wanted to ensure limited liability in your LLC in case someone should sue you. But it’s not quite that simple.

When a business is granted an LLC title, you, as the business owner, report the income generated by the business as personal income. Additionally, you are supposed to be protected from any legal actions pertaining to that business. However, this is only true if you take the correct steps after filling out the Articles of Organization paperwork to establish your LLC.

If another business or person were to bring a lawsuit against your business, their attorneys aren’t going to just assume that since your business is an LLC that they have no way of going after your personal assets. You need to make sure you have been running your business as a separate entity. Here are some tips to ensure limited liability in your LLC:

  • Maintain a separate bank account for your LLC and your personal finances.
  • Never mix your personal funds and your business income.
  • Do not deposit money paid by a customer directly into your personal bank account.
  • Avoid using marketing materials which use your personal name. Stick to the business name.
  • Do not take money from your company’s account without documenting the purpose.
  • Apply for an employer identification number (EIN), even if you have no employees.

In essence, you need to establish a delineation between yourself as a person and your business. If you use the money interchangeably, meaning there is no clear difference between your personal and business income, an attorney may argue that you do not have limited liability in your LLC, since you and the LLC have acted as one. To completely protect your personal assets, it’s important to create easily traceable paper trails which clearly establish the difference between you and your LLC.

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