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by KallDrexx
2646 days ago
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If you are a one man LLC, most likely just having an LLC will not protect your personal assets. https://info.legalzoom.com/owners-liable-llc-3298.html > Members can also be held personally liable for court judgments against the LLC if the member has personally and directly injured someone or caused financial loss in the course of business, or has knowingly done something illegal or reckless. > ... > Courts usually require three elements to be present before they will allow the veil to be pierced and a member to be held liable for the financial losses of an LLC. First, the person bringing the lawsuit (the plaintiff) must show that the LLC was controlled and dominated so completely by the member in question that the LLC was a mere instrument of that person and indistinct from her. The plaintiff must then show that a breach of duty occurred -- for example, that the member committed fraud or failed to keep adequate records. The final element is that the control and the breach of duty must have caused injury or loss to the plaintiff. Those aren't very high standards if a successful lawsuit is lobbed your way for software you have been contracted to right. Edit: Not that using an LLC isn't a good idea, I just think the "legal shield" benefits are often overstated and misunderstood. |
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> The company's actions were wrongful or fraudulent.
which seems like a fairly stringent requirement. Though it also notes [1]:
> [Single member LLCs] are also susceptible to "piercing the corporate veil," which occurs when the courts find that the entity and the owner are not really separate and thus the owner is personally responsible for the business’s debts. The easiest way an opposing party can prove this is by demonstrating a lack of adherence to the LLC operating agreement or that the operating agreement is riddled with errors.
which seems like a more significant concern for well-intentioned freelancers.
[0] https://www.nolo.com/legal-encyclopedia/personal-liability-p...
[1] https://www.nolo.com/legal-encyclopedia/single-member-llcs.h...