From time to time, I receive question from entrepreneurs about alleged deficiencies in single-member LLCs (limited liability companies). (As is discussed below, single-member LLCs are different from multi-member LLCs.) This post is adapted from a question about single-member LLCs that I answered on Avvo.
Single-Member LLCs Provide Limited Liability Protection
Q. What is a best way to include a relative-foreigner as LLC member in CA? I formed single-member LLC in CA. Unfortunately I found later that single-member LLCs do not provide usual limited liability protection.
A. It appears that you are confused.
A single-member does provide limited-liability protection (assuming that required formalities are addressed appropriately).
However, Membership may be Subject to Seizure
The “problem” withe single-member LLCs – one cited frequently by asset-protection geeks – is that if the member has personal liabilities, the member’s LLC membership interest may be subject to seizure to satisfy the liabilities, depending on which state’s laws apply.
So, in summary:
- For business purposes, single-member LLCs are fine.
- For asset protection purposes, single-member LLCs are a mistake.
Check out all posts about LLCs.
Dana H. Shultz, Attorney at Law +1 510 547-0545 dana [at] danashultz [dot] com
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact a lawyer directly.