Thank you very much for your reply.
Registration as an LLC will ordinarily protect your personal assets and limit the collection of any judgment to assets in the company's name. This "insulation" from personal laibility is one of the defining characteristics of LLC status (which as you may know, stands for "limited liability
company") and so will provide protection of your home, vehicles, etc. in most instances.
The above noted, your personal assets may still be at stake if the plaintiffs can convince the court of both of the following:
(1) that there was such unity of interest and ownership that the separate personalities of the LLC and the owner (you) no longer existed, and (2) that, if the acts giving rise to legal action are treated as those of the LLC alone, an inequitable result will follow.
The above are the criteria for what courts and attorneys call "piercing the veil,
" which, as you might guess, is a theory by which the owner of an LLC can be held personally liable for a judgment against the company as a matter of fairness to the plaintiff who obtained that award.
Courts are very hesitatant to "pierce the veil," and will generally only do so where the LLC structure has been abused in some substantial way. For a great summary of the factors courts will consider in determiing whether to "pierce the veil," see the seminal California case on that topic here: http://scholar.google.com/scholar_case?case=17577914281106046705&q=associated+vendors+oakland+meat&hl=en&as_sdt=4,5
Most notably the Associated Vendors opinion states as follows:"A review of the cases which have discussed the problem discloses the consideration of a variety of factors which were pertinent to the trial court's determination under the particular circumstances of each case. Among these are the following: Commingling of funds and other assets, failure to segregate funds of the separate entities, and the unauthorized diversion of corporate funds or assets to other than corporate uses; the treatment by an individual of the assets of the corporation as his own; the failure to obtain authority to issue stock or to subscribe to or issue the same; the holding out by an individual that he is personally liable for the debts of the corporation; the failure to maintain minutes or adequate corporate records, and the confusion of the records of the separate entities; the identical equitable ownership in the two entities; the identification of the equitable owners thereof with the domination and control of the two entities; identification of the directors and officers of the two entities in the responsible supervision and management; sole ownership of all of the stock in a corporation by one individual or the members of a family; the use of the same office or business location; the employment of the same employees and/or attorney; the failure to adequately capitalize a corporation; the total absence of corporate assets, and undercapitalization; the use of a corporation as a mere shell, instrumentality or conduit for a single venture or the business of an individual or another corporation; the concealment and 840*840 misrepresentation of the identity of the responsible ownership, management and financial interest, or concealment of personal business activities; the disregard of legal formalities and the failure to maintain arm's length relationships among related entities; the use of the corporate entity to procure labor, services or merchandise for another person or entity; the diversion of assets from a corporation by or to a stockholder or other person or entity, to the detriment of creditors, or the manipulation of assets and liabilities between entities so as to concentrate the assets in one and the liabilities in another; the contracting with another with intent to avoid performance by use of a corporate entity as a shield against personal liability, or the use of a corporation as a subterfuge of illegal transactions; and the formation and use of a corporation to transfer to it the existing liability of another person or entity.
There are no black and white answers as to what satisfies the legal standard for piercing the veil. Each case is evaluated on its unique facts and the assessment ultimately has a subejctive element. This, nonetheless, is what the plaintiffs will need to argue in order to collect their judgments against your personal assets. The odds of them being able to do so are not high.
Please do not hesitate
to let me know if you have any questions or concerns regarding the above and I will be more than happy to assist you further.
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