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LLC Information Alert - When it is Too Late to Form a Limited Liability Company


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Are you thinking of delaying the formation of a limited liability company for your business? Many think they can do this later and get LLC protection if and when they need it. This is not only wrong but can also get you in more trouble with the law.

The LLC is a great asset and liability protection vehicle. However, one must form a limited liability company for a valid and legal purpose and not to avoid being liable for an existing lawsuit or problem.

The biggest mistake a business owner can make is thinking that as long as his or her business is small or only making a little bit of money, no protection is needed. These people are lacking important LLC information about how its protection works. Thoughts like the following one are only creating a trap for you later: I will create my LLC once I am making more money or have more business activity.

Fraudulent Conveyance of Assets is Unlawful

If you are already being sued or in a business dispute, it is too late to form a limited liability company to protect yourself. In fact, if you did form one and transferred your assets to it, you are actually committing an unlawful act.

This impermissible activity is called fraudulent conveyance and it is a form of fraud. Fraud is actually a civil offense under the law and can result in you being liable for significantly more in fees and penalties. If the activity is particularly egregious, you could even be imprisoned.

Many sole proprietor businesses find themselves in this dilemma. They have built a growing business and then all of a sudden someone falls in their store and sues them or a disgruntled employee files a claim. Another common example is when a landlord's tenant is suing for a breach of contract or worse an injury that happened in the landlord's property.

Now, it is a known fact that the more successful your business gets, the more likely you will experience a lawsuit or other major dispute. Here is some important LLC information to know- the LLC only provides protection from the day you form a limited liability company. So if you start a business first and create one later, all business activity performed prior to the date of formation can come back to haunt you.

If you plan your business properly from the beginning by forming a limited liability company and having all business activity conducted by the LLC, you are best protecting yourself for years to come.

For a FREE LLC GUIDE and to access a wealth of free LLC Information , visit The LLC Learning Center at


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