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Written by : Claudette Ramella
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hey jim hart back at you here from hawthorne law and today i want to share with you how to avoid the four risks that are inherent with every single single member llc that are out there so my name is jim hart i am the founding attorney at hawthorne law and basically what we do at hawthorne law is we provide legal information tips and strategies that you can use to help protect your online business and we do that mostly through this youtube channel so please don't forget to subscribe hit the little button below and hit the little bell thingy as i like to say and so you get notified whenever we post new videos going into the end of 2019 there was this renewed effort to build up this channel in the past several months i've started posting a little bit more regularly and my goal for the remainder of this year and moving into 2019 is to post videos on a weekly basis and then also one idea that i have in mind is to do regular q a sessions on either thursday or fridays of each week where i'm just gonna basically go in and answer viewer questions so if you want to hit me up with a question if you want to send me something you can either leave a comment below or even better than that go to my twitter it's at hawthorne lg i believe that's right hold on a second let me check yes that's correct at hawthorne lg go ahead and if you want if you've got a question just go ahead and uh send me a tweet there and just mention me in the tweet i think that's how that works i'm not very good with the twitters but i think that's how that whole system uh works so anyway that's the best way to reach me all right so let's jump right into what i want to talk to you about today and today what i want to share with you are the four things that you can do to avoid the risks that are inherent in every single single member llc and before we get into that let's do a little background here so i've talked a lot about llc's on this channel and one thing i want to share with you today is is what an llc is now when we say single member llc and bear with me please because i've got i'm getting over a sickness which is why i don't know that i posted last week i've been having a lot of coughing and flammy stuff disgusting you don't want to know anything about that but basically bear with me if i start hacking up along here in the middle of this video that's why so let's start with with the single member llc we call it a single member llc because when you're talking about an llc the person that owns the llc is called a member so that's different than like a corporation where the person that owns the corporation is a shareholder so you might own stock in a corporation but when you're talking about an llc if you own the llc what you own is a membership interest and if you are the only person that owns the llc you are the sole member or the single member owner of that llc so single member llcs are different from multi-member llc's where there will be a number of different owners and there's a whole different set of problems that come along if you do have a single member llc and that's what i want to talk to you about today now the reason all this is important is because when you have a single member llc a lot of the reasons that most people form a single member llc is because they want some level of liability protection in other words if their business does something that causes them to get sued then they want to make sure that the person that's suing the business can't come after their personal assets does that make sense if that makes sense just comment below and say yeah i'm getting what you're saying so far that would be helpful when somebody does that and they're able to sue the llc and they go through and sue the owners of the business as well and they're able to get at those personal assets that's called piercing the corporate veil you do not want that to happen and there are four primary ways that that can happen and that's what i'm going to talk to you about and how you can avoid the risk of that happening with your llc so basically the first thing you're going to want to do when you're a single member llc to protect yourself is you want to make sure that you follow all the appropriate proper legal formalities that are required to operate and own a llc so this is going to be you want to do the same things for a single member llc that you would do if there were multiple owners and it was a multi-member llc or if it was an even bigger business than that the the biggest most important thing you're going to do is you're going to want to have what's called an operating agreement an operating agreement is an agreement between you as a member or owner of the llc and the llc to make sure that the llc is run in certain ways and that means that it talks about how you're going to take a salary it might talk about how you're going to choose to buy property for the llc the type of business that you're going to be engaged in the type of insurance that might be required where the business is going to be located all sorts of different things what happens if you decide to dissolve the business how much money you're going to contribute to the business to make sure it's adequately capitalized all these things go into the operating agreement i know what you're thinking you're thinking well that's i gotta take a phone call all right so i'm back that that one phone call turned into roughly an hour and a half of phone calls three phone calls right in a row so anyway what was i saying so i know what you're thinking about these operating agreements you're thinking well that is all well and good but why do i need to do that if it's just me if it if i am the only owner of the business why do i need to have a contract with myself about what i'm supposed to do and how i'm supposed to run the business this is why i'm in business for myself i want to be able to do my business the way i want to do it and i don't want to be bound by all these legal formalities well okay but if you want to protect yourself against potential legal liability if you want to protect yourself against somebody suing you and getting at your personal assets then you need to follow these legal formalities that's what i'll that's all i can tell you so the operating agreement is a big one that you're going to need to do another legal formality is to make sure you keep track of key decisions that are made in the business and you do that with meeting minutes so you're going to have regular meetings of the members and in this case it's going to be you and you and you're just going to have a meeting with yourself and you know let's say you decide that you want to buy a um you know a brand new laptop for the business well then you're going to have a meeting with yourself and you're going gonna say today we we had a meeting of the members of the llc and we be it resolved that we decided to purchase a new apple air book and the cost of this is going to be two thousand dollars and we're going to use the firm or the uh the business credit card to purchase this equipment and pay for it out of the profits of the llc something like that anyway
Thanks for your comment Leandro Sarkisian, have a nice day.
- Claudette Ramella, Staff Member
how's it going everybody welcome back taxes made simple the channel where i demystify tax information to make taxes simple and stress-free welcome back in in today's video we're going to be going over the difference between single member versus multi-member llc's that's right there are several different types of llcs and i know you guys are aware of that and each have their own rules and tax obligations and if you are thinking about starting an llc you need to know whether or not it makes sense to have a single member or if you should be setting up a multi-member and getting into partnership with somebody maybe the government views single member llc's different than they view multi-member llc's single member llc's are actually disregarded entities are you sure you want a disregarded entity learn more come on in and i'd like to take a moment to thank taylor brands for sponsoring this video more on them later right guys before we jump into the differences between single member and multi-member llc's let's go over a quick refresher of what llcs are so we all have the same understanding llc stands for limited liability company a limited liability company is just a type of business structure that limits the liability for the business owners that's all it is okay what this means is is that the llc's if the business incurs large debts that are called in or is sued the owners of the business cannot be personally held liable for the debts of the business only the business can be held liable and only the businesses assets are at stake this is opposed to other business structures such as sole proprietors in which business owners can be held personally liable for lawsuits or the company's debts now before we continue this video i'd like to briefly talk about the many challenges new entrepreneurs face when starting a new business being an entrepreneur myself i remember running into a lot of challenges trying to figure out who is going to set up my llc who is going to create my website who is going to create my logo who is going to run my email marketing i had all of these different hats that i had to wear and the list goes on and on and on as many of you guys know time is money so why not work smarter than harder this is why i want to introduce you guys to taylor brands right now taylor brands is the one stop shop for all aspiring business owners because taylor brands offers everything from logo making they can offer your domain a website creation a business card printed for you merchandising and now they even provide llc services all on their website so it makes it truly a one-stop shop making it super easy for any new business owner who's getting launched an easy way for them to get launched for an affordable price right now taylor brands is only charging about 3.99 so spending money with them and doing research is how you can get your business off the ground and brand yourself correctly if you're interested in learning more visit the link below let's get back to this video okay now that we've done a little quick refresher on llc's let's talk about single member llcs and multi-member llc's a single member llc first is an llc in which one person has complete control over full ownership of that llc however the llc is still considered its own legal entity separate from the owner owners of these type of businesses they do not have to worry about their personal bank accounts their personal houses cars retirement accounts savings accounts etc being seized to pay for a debt or reliability of the business this provides single member llc owners with a level of insulation from the risks associated with their businesses so this liability limitation is essential for helping single member llc owners to feel confident enough to conduct business and to take certain risks that are necessary for the expansion of business or else we would probably not see as many business owners we have today for example without liability limitations a business owner might not feel comfortable enough to take a 50 000 loan to grow his business because he might be worried that he will have to end up paying this back if something were to go south or he might have to give up at his house in order to cover the debt if everything goes south with the business but with limited liability protection of a single more llc he might feel secure enough to take the risk which might be vital to taking his business to the next level and having this protection is especially important for single member llc owners because they run their businesses by themselves without any other partners this is because they would have to shoulder the full burdens and debts and liabilities of the businesses themselves if something were to go wrong with the company in such a case they wouldn't have any partners to help them for tax purposes guys single member llcs are considered pass-through entities this means that the taxes pass through the llc directly to the owner meaning the owner is the only one taxed once for his or her income through the llc and the llc is not taxed separately okay senior member llc owners are required to pay self-employment taxes on their taxable income welcome to my channel and multi-member llc owners are too now let's talk a little bit more though about the multi-member llc because multi-member llc's are completely different than single member llcs it clearly means you have multiple members multi-member llc's can have unlimited amount of owners so two people could form a multi-member llc together 10 people can form a multi-member llc together a thousand people could form a multi-member llc together and etc when it comes to forming either a single or multi-member llc in america most states are very open about who can form one for example all the following people that i'm about to list can form either a single member or a multi-member llc in most states in america if you're one a sovereign citizen two a non-us citizen three a non-us resident or for you are another llc or a corporation multi-member llcs are either member managed or manager managed and what i mean by that is member managed llcs are multi-member llc's in which all of the members are responsible for running the business together and a majority approval is required to enter into contracts into securing loans or just making other legal binding decisions this is a member managed llc a manager managed llc are multiple member llc's in which one person or a number of people acts as managers for the business and are responsible for running it managers can be members of the llc or third parties just like single member llc's just like single member llcs multi-member llcs limit liability for the llc owners and protect them from being held personally liable if there is a lawsuit or if there is a major debt that is owed by the company that is called in now it is important to note that both multi-member llc owners and single member llc owners can be held personally responsible if they commit a criminal act such as fraud or embezzlement so just because you have limited liability if you own an llc does not make you exempt from following the l
Thanks Shawn your participation is very much appreciated
- Claudette Ramella
About the author
I've studied astrobiology at Indiana University South Bend in South Bend and I am an expert in natural language processing. I usually feel giggly. My previous job was exhibit artist I held this position for 7 years, I love talking about association football and memory training. Huge fan of Robert Sean Leonard I practice gymnastics and collect vintage cars.
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