In Ohio, asset protection lawyers often use a limited liability company (LLC) as part of an asset protection strategy. But an LLC must be structured correctly and specific requirements and ongoing procedures must be met if the LLC is to offer any asset protection at all.
Most people don’t understand LLCs and how they work. They don’t understand that a LLC must be operated as an actual business or the assets it contains will not be protected from creditors or lawsuits. Because of this, people commonly form a limited liability company as part of their asset protection strategy but then make one or more common mistakes that render their LLC powerless to protect their assets. While the person creating the LLC is responsible for many of the actions required to keep the LLC viable, it is the responsibility of the Ohio asset protection lawyer assisting in forming the LLC to make sure the client understands what is required.
The five mistakes listed below are the ones I see most frequently. Avoid these mistakes when using a limited liability company as part of your asset protection strategy.
Mistake #1: Thinking that filing articles of organization is all you need to do
There is much more to creating an LLC than filing articles of organization. A viable LLC should also have:
Remember that an LLC is a business. In order for its assets to be protected, it should be structured and operated like a real business. Your Ohio asset protection lawyer should help you with each necessary step to ensure a viable formation.
Mistake #2: Neglecting to fund the limited liability company
An LLC cannot protect what it doesn’t own. Ownership of assets must be transferred to the LLC. Real estate, automobiles, bank accounts, investments accounts, and all other assets that are titled in your name rather than the name of the LLC are not protected. At my Ohio asset protection lawyer’s office, we always handle title and ownership transfers for the client, but not all attorneys do.
Mistake #3: Failing to conduct business solely in the name of the LLC
Failure to open a bank account in the LLC’s name, sign documents in the name of the LLC, have checks written to the LLC, write checks in the name of the LLC — all these indicate you are not operating as an LLC and collectively may negate any protective value of the LLC in court. When you conduct business that involves your LLC, conduct the business in the name of the LLC, not in your own name.
Mistake #4: Neglecting to have more than one owner of the LLC
Asset protection for a LLC is significantly increased if there is more than one owner. The only downside is that the LLC will have to obtain an EIN (employer identification number).
Mistake #5: Forgetting to hold annual meetings and fulfill other ongoing requirements
As an Ohio asset protection lawyer, I can’t stress enough that a limited liability company is a business and needs to be treated like one. A LLC should hold annual meetings, keep minutes of those meetings, and file annual reports. Adoption of resolutions by the members and keeping records are other ongoing activities that should also be done to keep a LLC viable.
It may seem that there are too many requirements and hassles involved with a limited liability company to make it useful for asset protection, but a LLC offers a high level of protection and control over the assets that other asset protection tools cannot offer. This is especially true when used in combination with trusts as part of a complete asset protection strategy. Your Ohio asset protection lawyer can guide you in setting this up.
In Ohio, Gudorf Law Group, LLC, can help make sure your limited liability company is structured properly as part of your asset protection strategy and guide you in protecting the validity of your LLC. Call our Ohio asset protection lawyer’s office at 1-877-483-6730 to schedule a free consultation.