Orem, UT (PRWEB) March 17, 2013
The natural tendency is for people to treat their business as just another part of life, and so the mingling of business and personal assets often takes place. People tend to mix their own money with the money of their business, which leaves them wide open in the case of lawsuit.
And so it's vitally important that any LLC have a clearly defined operating agreement that is logically applied. The whole point of creating a limited liability company or a corporation is to protect the assets of those who own that LLC or corporation.
Unfortunately, many people create an LLC for business purposes but do not maintain it as a distinct entity with its own assets and operations. They mix their personal lives with their business lives, and in so doing make it easy for the corporate veil, that they have erected to protect their personal assets, to be pierced.
Mr. Phillips warns, “Failure to have a customized operating agreement and to stick to it means that the intended protection is actually thrown away and can be easily set aside by a judge. Failure to abide by the rules of the LLC cuts its asset protection potential.”
There are many attorneys who consider piercing the corporate veil to be routine. Any number of problems can cause the corporate entity to be pierced or set aside in court. Things like poor documentation, poor structure, violation of the separation between company and personal assets or even just sloppy attention to formalities can leave the owner liable to his or her company’s creditors. This is particularly true for small businesses that are privately held, or when the LLC has few owners, limited assets or a small number of shareholders.
Phillips notes, “I know that small business owners have a lot to do. They do not always have the time to really understand the protection afforded by an LLC and to operate their business as an easily recognized separate legal entity. However, if they don’t use their company properly, when they get in trouble, the protection that they thought they had won’t be there.”
A customized operating agreement that has been used properly is an LLC's best defense in case of lawsuit or business failure. The problem is that many business owners don't really understand business structure. This is why Phillips has issued an update to his widely used Operating Agreement Template. He gives a detailed explanation of asset protection is an easy to understand step by step manner.
The Operating Agreement Template can be downloaded for free.
Mr. Phillips serves as a counselor to the Supreme Court of the United States. He is the author of 11 books, along with his latest book Protecting Your Financial Future. He has written hundreds of articles for professional people assisting them in finding various strategies to use the law to protect their property, save taxes and make additional money. He has given addresses at thousands of business seminars. He enjoys helping people apply the law, not only to provide asset protection and estate planning, but to use it to structure businesses and save taxes, helping individuals find success.