Are my LLC or corporate assets protected from my personal creditors?
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Are my LLC or corporate assets protected from my personal creditors?
I am in debt and unable to pay my credit card bills. Can credit card companies come after the assets of an LLC or corp that I am the owner or officer of? If so, should the company be taken out of my name? Is there a structure that I should use that is best suited for this situation? What is the best course of action in protecting the assets of my company? In the event that I settle with the credit card companies or declare bankruptcy, how will that affect things?
Asked on December 28, 2010 under Bankruptcy Law, New York
Answers:
M.T.G., Member, New York Bar / FreeAdvice Contributing Attorney
Answered 13 years ago | Contributor
The purpose of an LLC is to limit personal liability by limiting collection f a judgement to the assets of the LLC. It should also have the Opposite effect: to protect the assets of the corporation against a personal suit. An LLC is still a corporation and in order to be able to attack the assets of the corporation a creditor would have to "pierce the corporate veil." This is a very difficult thing to do for the simple fact that corporations law was created to make sure that mistakes by individuals as individuals do not take down businesses. But it is not impossible say if the debt you incurred was incurred on behalf of the corporation, etc. What you need to do is to take all your information to an attorney in your area to discuss in detail. Good luck to you.
MD, Member, California Bar / FreeAdvice Contributing Attorney
Answered 13 years ago | Contributor
You have an LLC (limited liability corporation) but in many situations just because you have an LLC doesn't mean you are automatically protected. This is especially true when you use the company for personal expenses and vice versa. If you commingle monies, assets and debts, you can run into a problem with protecting the company. However, simply taking the company out of your name (leaving the company) may not protect you, especially if there are laws in your state that deem such behavior to be a criminal act to avoid liability in a civil arena. When you declare bankruptcy for yourself or the company, the trustee will be asking for a lot of information from you (including all expenses, assets) and the like and the court will decide if anything can be attached from the company in any way.
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