Does an LLC Provide Protection to the Business Owner?
Are you considering forming a limited liability company (LLC) in Florida. If so, you may be wondering: Does an LLC actually provide real liability protection to the business owner? The answer is “yes”—one of the primary benefits of an LLC is that it offers tangible and reliable liability protection. Your LLC’s assets and liabilities are legally separate from your personal assets and liabilities. Within this article, our West Palm Beach business law attorney explains how an LLC protects its owner (members).
The Baseline: An LLC Provides Strong Personal Liability Protection to Members
Owners of a Limited Liability Company (LLC) are referred to as “members.” Members can be individuals, corporations, or even foreign entities. In Florida, there is no minimum or maximum limit on the number of members in an LLC. One individual can have full ownership over an LLC.
A key thing to know is that LLCs—regardless of total number of members (owners)—provide genuine personal liability protection. Under Florida law, the entity (LLC) is distinguished from the individual members. As such, it shield their personal assets from the business’s debts and liabilities
Know the Exceptions: When an LLC’s Liability Protection Falls Away
While an LLC in Florida offers very strong liability protection—especially when compared to a partnership or sole proprietorship—that liability is not absolute. There are specific circumstances under which this shield can diminish or fall away entirely—thereby exposing members to potential personal liability. Still, these exceptions are quite narrow. Some examples include:
- Personal Guarantees: Personal guarantees are the most common exception to LLC liability protection. If a member personally guarantees a loan or another obligation, they directly assume responsibility, bypassing the LLC’s liability protection.
- Fraudulent Activities: Fraud can allow for a piercing of liability protections for both LLCs and traditional corporations. If members commit fraud or engage in illegal actions under the guise of the LLC, they can be held personally liable.
- Failure to Maintain Separation: failing to maintain the separation between personal and business finances—sometimes known as “piercing the corporate veil”—can lead to personal liability. An example includes extensive co-mingling funds.
- Unpaid Payroll Taxes: Finally, unpaid taxes, specifically unpaid payroll taxes, that are not collected or remitted by the LLC can become a personal liability for the members. Notably, there are very strict regulations in place for payroll taxes. A person deemed responsible for a payroll tax violation could not only face personal liability, but potential criminal charges.
Speak to Our Business Law Attorney in South Florida for Help With an LLC
At Pike & Lustig, LLP, our Florida business law attorneys have extensive experience working with the members of limited liability companies. If you have any specific questions or concerns about liability protection and your LLC, we are here as a resource. Contact our firm today to arrange your fully private, no commitment initial consultation. From our conveniently located offices in Miami and West Palm Beach, we help people navigate liability issues related to LLCs throughout Florida.
