Gaizer.com Tips for Business Start-ups

As with corporations, there are certain exceptions to the limited liability protection afforded by the LLC:

·    The LLC defaults on a loan that an owner personally guarantees.
·    The managers do not deposit the taxes withheld from employee wages.
·    A member injures someone.
·    The owner does not separate the corporation as an independent entity; that is, the owner does not separate business from personal matters.
·    Illegal activities are not afforded limited liability protection.

An LLC should not be characterized as an extension of the owners’ personal affairs (piercing the limited liability veil) if the owners adhere to the following corporate formalities:

·    The LLC has an operating agreement in place.
·    The owners make an adequate investment in the company.
·    The LLC maintains business records and transactions separate from the owners.
·    The owners manage the LLC legally, and are not concealing any relevant or important information to investors, creditors, or vendors.