Why a Simple LLC Provides ZERO Protection

If you form a “simple” LLC online with an EIN and a basic operating agreement. With the first legal issue, you may be “financially paralyzed” even if you win the lawsuit! You will not be able to get any loans or financing, which is paramount in today’s economy.

What is a “simple” LLC? That is an LLC filed through the Secretary of State with a registered agent, an EIN obtained through the IRS, and nothing else. It is the “starter” low-end package sold online with most incorporating companies. There is no operating agreement, membership certificates, or formalities.

The big issue is if your business operating through the LLC or LLC holding the assets gets sued. You might think I have never been sued, nor am I the “type” to create issues. The current economic conditions are a perfect storm for more lawsuits in the future (and opportunity).

If you lose the lawsuit, it gets worse.

Most attorneys warn against the $99 online LLC packages. Why? Because they will slice through those in 15 minutes in court and go after the individual every time. That piece of paper provides NO protection (even with insurance). 

What do they mean by “slicing through those in 15 minutes”? That is called piercing the corporate veil, where the owner is PERSONALLY liable. Once you are personally liable, you cannot obtain any personal funding because every financial application wants to know if you are currently in a lawsuit. When you answer yes, you will not be funded. You would not even be able to get a HELOC (home equity line of credit) from your residence. 

This is what we mean by being “financially paralyzed,” so you should not operate a business as a sole proprietorship.

The better approach is to form a COMPLETE LLC with the correct operating agreement and formalities to protect you and your assets, whether you are building your brand or looking to protect your safe assets.

NCP will help you before, during, and after formation to protect your entity veil, properly update any marketplace accounts to avoid suspension, and properly transfer your assets to the new entity so they are protected. Finally, you provide support and structure to protect your entity veil and personal assets.