Q1: What does an LLC protect me against, and what does it NOT protect against?
An LLC provides robust personal asset protection against commercial debts, commercial real estate lease obligations, and standard contractual defaults entered into by the business. It does not protect you from claims based on your own tortious actions, such as personal negligence, vehicle accidents caused while working, intentional fraud, or personal loan guarantees signed with a commercial lender.
Q2: What is the difference between member-managed and manager-managed LLCs?
In a member-managed structure, all equity owners hold direct operational authority to sign contracts, bind the business, and conduct day-to-day operations. In a manager-managed structure, the members act like passive shareholders, delegating direct operational authority to designated managers who may or may not own equity in the firm.
Q3: Does forming an LLC eliminate the need for commercial liability insurance?
No. The corporate veil shields personal assets from business debt protection claims, but it does not prevent the business entity itself from being sued and forced into insolvency. Commercial general liability insurance, errors and omissions policies, and property coverage work alongside the legal entity to keep the business solvent during active litigation.
