6 Ways to Protect Your LLC Status

April 3rd, 2014 → 3:11 pm @ // No Comments

ProtectLLC Status

Many writers consider adding Limited Liability Company (LLC) status to their writing and publishing business.

Read the pros and cons of LLC status in Chapter Six of my book, Business Tips and Taxes for Writers, here: http://taxesforwriters.com/book/table-of-contents/

Safeguard LLC status

If you do obtain LLC status for your writing business, it is important that you safeguard that status. The status can be disregarded in a lawsuit if you are mixing your personal and business assets.

Lately, limited liability status has been challenged in court, and several business owners found that their personal assets were at risk. To avoid piercing your limited liability protection, you must keep your business separate from your personal life. Mixing assets may lead a court to determine that your LLC status is weak and therefore hold you personally liable. “It isn’t enough for business people merely to have a liability shield; they must also take reasonable measures to protect this shield,” cautions New Hampshire attorney John Cunningham.

There are several ways to protect your shield of limited liability:

  • Don’t commit fraud. Even LLC status can’t protect you if you’re a crook!
  • Set up a separate checking account for your business. This is a no brainier for every business in my CPA-opinion. Not only does a separate checking account protect your LLC status, it makes record keeping nad tax preparation much easier.
  • Avoid treating business assets as your own. So you purchase your laptop with businesses assets and take a business deduction for it. A bit of personal use of your computer may be allowed, but don’t let the kids use it for homework, etc.
  • Avoid personal guarantees on business loans. Nothing will poke a hole in your limited liability shield faster than personally guaranteeing a loan.
  • Purchase professional liability insurance. LLC status is not a replacement for insurance. I have both professional liability insurance and LLC status for my sole proprietorship and hope I never need either.
  • Sign contracts in the name of your LLC. I have started signing my name as Carol Topp, CPA, LLC. The official name of my LLC as filed with my state is my name with “LLC” added.

If you’d like some advice on the best business structure for your writing and publishing business, consider a phone consultation with me.

Contact me here.

Carol Topp, CPA

 

 


Tags: , , ,

Leave a Reply