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LLCs and Asset Protection Just about ten years ago, our economy went through one of the toughest periods since the depression of the early 20th century. As a result of that experience, there were many individuals and businesses that suffered serious losses, some even to the point where they have not yet fully recovered. A lot of these businesses ended up having to close down for good, while countless individuals and families lost their homes, properties, and other vital assets. Since then, the economy has certainly improved a great deal, and the majority of us who survived that time have been able to learn some valuable lessons about how to stay protected from any future financial harm. Going through that rough period, many people have since learned of the great importance of having certain measures in place to protect their assets from being taken away. Until then, there was a surprising number of people who were not even clear on the distinction between what assets are and what liabilities are. Even in those cases where they did understand that a home or property is considered an asset, they still did not know that other things like cars are considered liabilities, as they generally lose their value over time. By having a clearer understanding of what assets really are, they have then been able to learn more about what things they can do to both protect those assets they have and also increase the quantity of assets they have. Of the various strategies that people can use to protect assets, the method of forming a limited liability company, or LLC, is one that has gained a lot of popularity recently. As our technologies have advanced, especially with the growth of the online markets, there have been growing numbers of people who have been starting their own businesses. Especially since the vast majority of these are small businesses, if not essentially owned and operated by a single person, they have learned that establishing their businesses as LLCs is one of the best ways to ensure protection of their personal assets, should anything go wrong. Without the protection of the LLC, at any time that someone files and wins a lawsuit against them or their business, they could potentially lose their personal assets along with their business assets.
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By forming your business as an LLC, you are able to get some of the same benefits and protections as corporations, but with less bureaucracy and fewer personal risks. Again, the main factor here is that a standard corporation can be sued, and should that case be lost, your personal assets could then be counted as within the scope of the business and subsequently taken away. On the other hand, an LLC provides a greater assurance that your personal assets are not mixed together with your business assets. Because of this, your personal assets should remain protected, even if your business assets happen to be taken away.
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In many ways, this is actually a great time for anyone with enough discipline and will to take that leap and form a business. Learning from the past, by taking steps like forming the business as an LLC, people are less likely to repeat the financial mistakes that led to our previous economic struggles.