Do you have a second home? Do you operate a business? Do you currently have an interest in a S-Corporation? If you answered “yes” to any of those questions, then you should consider utilizing a Limited Liability Company (or LLC) to provide structure and asset protection for you and your assets.
An LLC is a business entity created under State law. Both Arizona allow for the formation of LLCs. By selecting the LLC as your business entity, you are able to take advantage of some of the benefits of both being a partnership and a corporation. The owner of the LLC (called a “Member”) is afforded the corporate protection of being limited in the liability that he or she may incur, while the partnership benefits include the ability to “pass-through” taxable income to the owner’s tax return (there are several options in selecting the appropriate tax treatment, and will require an individual consultation to determine the best fit).
Each State’s statutory scheme provides for the base-line protections afforded to LLCs. These are the default rules (i.e. if you do nothing else, you get at least these base-line protections). However, the key to maximizing the protections that your LLC can provide to you is to have a properly drafted Operating Agreement.
The operating agreement provides additional details on what your LLC allows or does not allow. When done right, the LLC’s assets are insulated from the outside world and conversely, your personal assets can be insulated from the creditors arising from inside the LLC (e.g. have a rental property inside an LLC, and the tenant slips and falls, sues and wins – that award cannot automatically reach your personal assets).
The attorneys at MH are well versed in the creation of LLCs and how these entities fit within your overall estate plan. Allow us to review your situation to help determine whether an LLC makes sense for you. Even if you already have an LLC in place, let us review your documents to determine if you are maximizing your protections.
This blog should be used for informational purposes only. It does not create an attorney-client relationship with any reader and should not be construed as legal advice. If you need legal advice, please contact an attorney in your community who can assess the specifics of your situation.
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