# Anyone form an LLC ?



## Jimmy44 (Jan 12, 2020)

Seem's like you can never get enough insurance. Has anyone formed an LLC to protect there assets ? If so how much does it cost ?


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## Jon Stoppable (Dec 11, 2019)

Doesn't quite work that way. An LLC protects assets outside the LLC from claims that originate from the LLC's business. It does not protect the LLC's assets from claims against the owner, as the LLC is an asset of the owner. So if the LLC owner is the business operator that causes an injury via their personal negligence in the course of business, all bets are off.


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## TheDevilisaParttimer (Jan 2, 2019)

Jon Stoppable said:


> Doesn't quite work that way. An LLC protects assets outside the LLC from claims that originate from the LLC's business. It does not protect the LLC's assets from claims against the owner, as the LLC is an asset of the owner. So if the LLC owner is the business operator that causes an injury via their personal negligence in the course of business, all bets are off.


Well the was a very big circle. But maybe we should first see which assets op is trying to protect. OP?


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## Jimmy44 (Jan 12, 2020)

TheDevilisaParttimer said:


> Well the was a very big circle. But maybe we should first see which assets op is trying to protect. OP?


For me it's my home and retirement fund.


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## TheDevilisaParttimer (Jan 2, 2019)

Jimmy44 said:


> For me it's my home and retirement fund.


LLC will protect that typically.


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## Jimmy44 (Jan 12, 2020)

TheDevilisaParttimer said:


> LLC will protect that typically.


Thanks that would put me at ease. Do I just do it


TheDevilisaParttimer said:


> LLC will protect that typically.


Should you use a lawyer to set it up ?


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## Jon Stoppable (Dec 11, 2019)

Protect from what? Liability from your own driving? That's probably not going to work. If you have a business with employees, that's a different matter.

Either way if you have significant assets, get them insured. Really, you'd figure a RS driver should be judgment-proof...


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## Jimmy44 (Jan 12, 2020)

Jon Stoppable said:


> Protect from what? Liability from your own driving? That's probably not going to work. If you have a business with employees, that's a different matter.
> 
> Either way if you have significant assets, get them insured. Really, you'd figure a RS driver should be judgment-proof...


I can see that clearly you are the authority on this issue. But just the same I will check with my attorney.


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## Jon Stoppable (Dec 11, 2019)

And don't be surprised when they tell you the same thing. And then maybe recommend a trust instead.

I mean you could have asked your attorney in the first place, right? But you chose to ask UP.


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## #professoruber (Feb 19, 2018)

Jon Stoppable said:


> Protect from what? Liability from your own driving? That's probably not going to work. If you have a business with employees, that's a different matter.
> 
> Either way if you have significant assets, get them insured. Really, you'd figure a RS driver should be judgment-proof...


@Jimmy44 - he is absolutely correct. Remember your the one coming on here asking other ants about law, a business advisor or attorney should be answer.

The perception of a LLC is that it protects the business owner but in the real like world, you will be filing this is a sole proprietor with no employees. So in the real world, if you have a LLC or not, if you are driving a vehicle or even a owner, the company and something happens, you will be sued along with yourself. You have zero protection.

Do your research. Check your laws. Hire an attorney. Utilize free resources.


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## IR12 (Nov 11, 2017)

Jimmy44 said:


> Seem's like you can never get enough insurance. Has anyone formed an LLC to protect there assets ? If so how much does it cost ?


There are knowledgeable people on this forum but with so many variables, you should seek professional advice when it comes to things of this nature.


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## Jimmy44 (Jan 12, 2020)

Jon Stoppable said:


> And don't be surprised when they tell you the same thing. And then maybe recommend a trust instead.


Yes silly me wanting to talk to someone with a law degree who has handled my legal issues for 25 years. Just in the rare case that you possibly left a few things


Jon Stoppable said:


> And don't be surprised when they tell you the same thing. And then maybe recommend a trust instead.
> 
> I mean you could have asked your attorney in the first place, right? But you chose to ask UP.





#professoruber said:


> @Jimmy44 - he is absolutely correct. Remember your the one coming on here asking other ants about law, a business advisor or attorney should be answer.
> 
> The perception of a LLC is that it protects the business owner but in the real like world, you will be filing this is a sole proprietor with no employees. So in the real world, if you have a LLC or not, if you are driving a vehicle or even a owner, the company and something happens, you will be sued along with yourself. You have zero protection.
> 
> Do your research. Check your laws. Hire an attorney. Utilize free resources.


This is an informal forum where topics are brought up and responded to in a friendly way.
If someone responds in a condescending way then that person should expect the same in return.


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## IR12 (Nov 11, 2017)

Jimmy44 said:


> I can see that clearly you are the authority on this issue. But just the same I will check with my attorney.


....now, you got it.


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## Jimmy44 (Jan 12, 2020)

IR12 said:


> There are knowledgeable people on this forum but, you should seek professional advice when it comes to things of this nature.


I thought the idea of this forum is the friendly sharing of questions and ideas. I feel there is room for humor but not a condescending attitude.


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## IR12 (Nov 11, 2017)

Jimmy44 said:


> I thought the idea of this forum is the friendly sharing of questions and ideas. I feel there is room for humor but not a condescending attitude.


This forum will show you the good, the bad and the ugly side of people mixed with lots of sometimes low budget, crassness.

Keep in mind, using a public forum opens you up to "characters" of all types and mindsets.


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## jgraham11 (Nov 2, 2019)

I have an LLC that is non-ride share related and I can echo other's sentiments in here (albeit in a more friendly manner) that LLC's only protect you from the risk of losing say outside investors capital. What you put into the LLC that is your own can't really be protected, your risk in your LLC is what you put into it essentially. When others come into the LLC as partners their risk is also limited to what they put in and the owner of the LLC has no liability on those assets hence the "Limited Liability". 

That being said it's not the be all end all. Owners of LLC's that are negligent or make extremely obvious errors can face legal issues still. I know here in the state of Massachusetts you're also required to have E&O insurance if you have an LLC. Honestly, it's worth the money because E&O insurance is another layer of protection which you can never really have enough of.


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## TheDevilisaParttimer (Jan 2, 2019)

Jimmy44 said:


> Thanks that would put me at ease. Do I just do it
> Should you use a lawyer to set it up ?


Yea your gonna have to sit with an attorney to set up and to see if a LLC is the best option for your situation.


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## jgraham11 (Nov 2, 2019)

TheDevilisaParttimer said:


> Yea your gonna have to sit with an attorney to set up and to see if a LLC is the best option for your situation.


Well he could have his LLC up and running by Friday if he wants to. I incorporated mine via SwyftFilings and I think it honestly took 3 days start to finish. As TheDevils said though if you have an attorney it's worth speaking to them about if it's even worth it. Whatever you do I'd avoid Sole Propietorships. They seem convenient but since you're worried about liability Sole Props don't protect you at ALL!


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## Jimmy44 (Jan 12, 2020)

jgraham11 said:


> I have an LLC that is non-ride share related and I can echo other's sentiments in here (albeit in a more friendly manner) that LLC's only protect you from the risk of losing say outside investors capital. What you put into the LLC that is your own can't really be protected, your risk in your LLC is what you put into it essentially. When others come into the LLC as partners their risk is also limited to what they put in and the owner of the LLC has no liability on those assets hence the "Limited Liability".
> 
> That being said it's not the be all end all. Owners of LLC's that are negligent or make extremely obvious errors can face legal issues still. I know here in the state of Massachusetts you're also required to have E&O insurance if you have an LLC. Honestly, it's worth the money because E&O insurance is another layer of protection which you can never really have enough of.


Thanks for that information. It's amazing the amount of risk we take everytime a passenger enters our vehicles. One second of losing your concentration and you could lose everything.



TheDevilisaParttimer said:


> Yea your gonna have to sit with an attorney to set up and to see if a LLC is the best option for your situation.


Sounds like good advice.


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## jgraham11 (Nov 2, 2019)

Jimmy44 said:


> Thanks for that information. It's amazing the amount of risk we take everytime a passenger enters our vehicles. One second of losing your concentration and you could lose everything.


I have to say though, I don't know if I see how an LLC will protect you as a ride share. So you're thinking is if you get into an accident and a passenger is hurt having an LLC won't make you liable? I mean that may be the case, but that's definitely a lawyer question. At the same time I'm sure that Lyft/Uber have protections on that because let's face it these passengers are more likely to try and go after them than an individual. There's gotta be something in the agreement fine print that tells customers they, and maybe their drivers, are not liable for any personal injury...

I may be totally wrong on that though.


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## Jimmy44 (Jan 12, 2020)

jgraham11 said:


> Well he could have his LLC up and running by Friday if he wants to. I incorporated mine via SwyftFilings and I think it honestly took 3 days start to finish. As TheDevils said though if you have an attorney it's worth speaking to them about if it's even worth it. Whatever you do I'd avoid Sole Propietorships. They seem convenient but since you're worried about liability Sole Props don't protect you at ALL!


The risk vs reward of rideshare is truly unbelievable when you think about it.


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## jgraham11 (Nov 2, 2019)

Jimmy44 said:


> The risk vs reward of rideshare is truly unbelievable when you think about it.


Oh no doubt. I'm in between jobs right now personally so it's okay for the time being I guess. The thought of doing this long term would be stressful though.


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## TheDevilisaParttimer (Jan 2, 2019)

Jimmy44 said:


> Thanks for that information. It's amazing the amount of risk we take everytime a passenger enters our vehicles. One second of losing your concentration and you could lose everything.
> 
> 
> Sounds like good advice.


Jimmy unless you have very high value assets your attorney is probably gonna recommend commercial insurance. It's has much higher limits to cover you in case something really bad happens.

If your assets are just that high in value, likely commercial insurance plus the LLC.


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## Jon Stoppable (Dec 11, 2019)

Jimmy44, I like you. I dunno why, but I figure if you already have an attorney, then just maybe you are trying to save him or her some grief and learn something about the topic before your meeting. Or if you like getting billed by the hour, be my guest.

LLC: limited liability company. Kind of a new entity (last 30 years or so), based upon the older limited partnership, but without the need for a general partner--that is, at least one partner that has unlimited liability. Standard practice was to form LPs with the GP being a shell corporation, so since there was no true GP, the states figured let's save everybody the step and create a true limited liability entity, the LLC.

LLCs are most often used to house business or income-producing assets. The limitation of liability is that the LLC owners (called members) shouldn't have their personal assets subject to claims against the business, just like if they were corporate shareholders. Let's say you own shares of Tesla, you aren't responsible if a self-driving Tesla runs over a pedestrian. Same concept with LLCs.

The rub is that if you are personally negligent in the business operations, your personal assets can still be subject to judgment.

In the context of RS, let's say you put your personal assets in an LLC. You are thus an LLC member, and your LLC interest is one of your personal assets. See the problem? You've added a layer of ownership, but you're still the ultimate owner. If you incur personal liability--say running over a pax--all of your personal assets will be subject to that judgment.

Let's say instead you put the RS business in the LLC, and say hey U/L, don't 1099K me, send it to Jimmy44 RS LLC. I mean I doubt they would allow that, but play along. Then you run over a pax. It was LLC business, right? Yes, but you were personally negligent, so your house and retirement funds could still be subject to that judgment (although both have some protection in bankruptcy court).

Another example: you run a business leasing cars to other RS drivers. Ah, now we have a use for the LLC: one of the other drivers--who had a clean record previously--runs over a pax. The LLC might be subject to that judgment, but you weren't personally negligent in leasing to him, so your house is safe. Probably. The plaintiff's attorney will try their best to get it though!

As for sole proprietors, we are all SPs here--if you do nothing, that is, you don't form an entity and place your business assets inside--you are by default a SP, or if you have a partner, both general partners in a general partnership. There is no limitation of liability in either case.

What about trusts? That is what your attorney is going to recommend for your house. It will be called something like a "family" or "living" or "revocable" trust. A trust divides legal and beneficial interest in property. When your house is in the trust, the trust is the owner, and the trustee administers the property. You are the beneficial owner, so you can live in it. Actually in a revocable trust, you can usually be both trustee and beneficiary! The magic thing is the trust agreement that your attorney will draft says that if someones sues the pants off of you, they can't have your house because you don't own it, the trust does. They get your pants though 

Trusts do another useful thing which is keep your assets out of probate court when you die, so that if your lousy third cousin tries to contest your will, it doesn't matter because none of your property is in the estate--it's all in the trust where it is *much* harder to contest.

More advantages: trust agreements are not public record, the trustee does not have to be publicly known (although their name would be recorded in a real property transfer), trusts do not have annual filing fees.

Oh yes, retirement accounts. Usually those are custodial accounts held by your investment advisor. Generally, you can't transfer ownership of retirement assets because that would be deemed a distribution. So you probably can't put those in a trust nor an LLC (although you might be able to invest in an LLC inside a self-directed IRA, but that is a different matter entirely and rather restricted so tread carefully in that area).

A final bit to understand is that if you have a judgment against you, even if you have no assets, that judgment will still be outstanding unless you declare bankruptcy. So be insured if you have significant assets such that you don't want to be in that position.


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## IR12 (Nov 11, 2017)

Jimmy44 said:


> Seem's like you can never get enough insurance. Has anyone formed an LLC to protect there assets ? If so how much does it cost ?


Look into Homesteading your house. 
States may differ but it's definitely worth looking into & may offer more protection of your assets against creditors and in some case bankruptcy. Good luck.


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## observer (Dec 11, 2014)

Talk to a business lawyer and not a lawyer or company that specializes in setting up LLCs.

There's some good info here,

https://howtostartanllc.com/connecticut-llc
An LLC doesn't protect your assets when you are involved in an at fault accident. In any at fault lawsuit against you the other lawyer will sue Jimmy44 LLC, Jimmy44 the person and John Does 1-100.

YOU will be paying a lawyer to defend not only the LLC but yourself personally if you were driving.

Another thing to keep in mind is that having an LLC costs money. Apparently there's a 120 dollar filing fee, a 20 dollar yearly state fee and a 250 dollar every other year franchise fee in Connecticut. Which is actually pretty inexpensive. In California it's 800 plus every year.

You also have to have meetings and document them.

LLCs are meant to protect investors, not owner/operators.

We had a couple LLCs. The one most relevant here covered our towing business. There were three of us investors, myself and two brothers.

One brother and I were strictly investors, our personal assets were protected by the LLC. The other brother was both an investor and a driver. His personal assets would not be protected by the LLC in an at fault accident.

We also had three full time drivers. Our personal assets would be protected if and when the drivers had an at fault accident. Our LLC would not protect the drivers, it would only protect us, the investors.

What did protect ALL of us was an adequate insurance policy that covered that type of accident. In our case we needed three different types of coverage. Our liability insurance alone covered us for one million dollars. I don't remember how much the other two insurances covered.

Driving accidents are really a matter of when and not if they'll happen.


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## Nina2 (Oct 6, 2018)

I used to have a LLC but got into a accident and it ended up costing me much of my assets i thought were protected with the LLC
I would never use a LLC for Uber or Lyft


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## Jimmy44 (Jan 12, 2020)

observer said:


> Talk to a business lawyer and not a lawyer or company that specializes in setting up LLCs.
> 
> There's some good info here,
> 
> ...


Thank you for that detailed reply. It's greatly appreciated.



Jon Stoppable said:


> Jimmy44, I like you. I dunno why, but I figure if you already have an attorney, then just maybe you are trying to save him or her some grief and learn something about the topic before your meeting. Or if you like getting billed by the hour, be my guest.
> 
> LLC: limited liability company. Kind of a new entity (last 30 years or so), based upon the older limited partnership, but without the need for a general partner--that is, at least one partner that has unlimited liability. Standard practice was to form LPs with the GP being a shell corporation, so since there was no true GP, the states figured let's save everybody the step and create a true limited liability entity, the LLC.
> 
> ...


Thanks for the detailed and informative response.


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## observer (Dec 11, 2014)

https://www.sfchronicle.com/busines...eelancers-What-to-do-if-a-client-15039926.php


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## Jimmy44 (Jan 12, 2020)

observer said:


> https://www.sfchronicle.com/busines...eelancers-What-to-do-if-a-client-15039926.php


I don't want any part of AB5 I think it is stupid. I listoned to the person behind this bill and she is clueless about rideshare. To say that Uber drivers are employee's is ludicrous.


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## Stevie The magic Unicorn (Apr 3, 2018)

There's very little that an LLC will protect you from.

Carrying commercial insurance would be a much better investment, plus you can take customers off books that way.


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## cho (Mar 26, 2016)

Perhaps check into umbrella insurance too. Farmers insurance was offering umbrellas to some existing clients for about $350 per year per $1,000,000 coverage, as an add-on to an existing policy. You could buy up to a $10mil umbrella.


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## Jon77 (Dec 6, 2018)

I have an umbrella policy, for every million dollars of coverage it’s gonna cost you between $300 to $400 per year.
It’s one of the best deals as far as insurance goes.
The other bulletproof way is to set up an irrevocable trust.
I was a trustee on a family trust for about three years.
The trick is it has to be “irrevocable” if it’s not irrevocable you can still be sued and lose your house.
If it is irrevocable that means in the eyes of the law you do not own it.
Nobody can sue you to get it, you can put anything in it a house you can put stocks, bonds.

401(k) and IRAs are covered by law already, you can’t be sued for retirement accounts.

As far as trust goes, a lot of people use life trusts or a revocable trust because they can change their mind in the future as far as who the heirs are going to be, you have a lot of future flexibility, but if you’re still alive you lose the ability to protect assets in a lawsuit.
A lot of revocable trusts are set up to automatically convert into irrevocable trust upon death of the grantor, so it automatically becomes bulletproof against any type of lawsuit against the heirs.

Life trust and revocable trusts are great for avoiding probate, it’s private, there are no public records nobody knows about it, and there’s no probate court.
It’s an absolutely seamless transfer of assets upon death.

If you decide to set up an irrevocable trust you cannot change it, you cannot change your mind to reassign a different heir at a future time, it’s set in stone.

But since it is set in stone it is not considered your property anymore, nobody can sue you over it.

Lawyers charge about $1500-$2000 to set up a trust with a spill-over will included.


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## observer (Dec 11, 2014)

Jon77 said:


> I have an umbrella policy, for every million dollars of coverage it's gonna cost you between $300 to $400 per year.
> It's one of the best deals as far as insurance goes.
> The other bulletproof way is to set up an irrevocable trust.
> I was a trustee on a family trust for about three years.
> ...


I've never used an umbrella policy.

So, I have a question for you. Will an umbrella policy cover business activities such as driving? I would think they would specifically exclude business activities.

I've never used a life trust either but I would think a property would either have to be owned free and clear to be placed in a trust or the mortgage company would have to sign off on it somehow. Otherwise people would just place their mortgaged homes in life trusts and mortgage companies wouldn't be able to collect.


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## Jon77 (Dec 6, 2018)

An umbrella policy will not cover business related driving occurrences.
For that you would need a business liability insurance policy.
My umbrella policy is in effect at all times until I actually have passengers inside of my car.
During that phase the $1 million Uber policy is in effect.

As far as putting a mortgaged house inside of a trust it’s actually done quite frequently.
But you’re right the bank would have to sign off on the retitling of the property into a family trust name.
Being inside of a trust does not protect you from being foreclosed on by the bank.
The bank retains a full right to foreclose if the mortgage is not paid.
But no creditor other than the bank has any way to get to it assuming it’s an irrevocable trust.

A revocable trust is not as strong because in the eyes of the law you still retain ownership since you can change the terms at will.
An irrevocable trust on the other hand is bulletproof.
I was a trustee of a revocable trust that automatically turned into an a irrevocable trust upon death of my wife’s grandfather.
That bullet proof characteristics came in very handy during the next three years that we had to take care of my wife’s grandma.

A good lawyer who specializes in elder law would be able to give you the full rundown of the pitfalls and the benefits.
Elder law lawyers specialize in asset protection strategies.
For us the help that we received from our lawyer was worth it’s weight in gold, it turned something that could’ve been an absolute nightmare into somehing that was at least tolerable.


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## observer (Dec 11, 2014)

Jon77 said:


> An umbrella policy will not cover business related driving occurrences.
> For that you would need a business liability insurance policy.
> My umbrella policy is in effect at all times until I actually have passengers inside of my car.
> During that phase the $1 million Uber policy is in effect.
> ...


Thnx, we are looking in to setting up a trust for some family owned property. Kinda curious how it all works.


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## Jon77 (Dec 6, 2018)

observer said:


> Thnx, we are looking in to setting up a trust for some family owned property. Kinda curious how it all works.


It's good you're thinking about asset protection, the majority of drivers don't pay it any mind.
Anytime we get behind the wheel ferrying passengers for money we're taking enormous risks.

A huge benefit of a trust is how bulletproof it is as far as claimants and creditors, but also it avoids inter-family feuds that can happen when only a will is used.
Wills can be attacked and contested very easily.
Trusts on the other hand are very difficult to contest and most lawyers will not even take up a case to try to fight a trust.

Many times avoiding probate and an inter-family fight is worth many times over what it costs to set up a trust.
Especially if you have unstable or vindictive family members.
And truthfully what family doesn't have a few of those folks lurking in the shadows.


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## cho (Mar 26, 2016)

Jon77 said:


> Life trust and revocable trusts are great for avoiding probate, it's private, there are no public records nobody knows about it,


Only minor point is I think the trust existence becomes public info when the grant deed from the individual to the trust is recorded (California real estate). Otherwise, great recap.


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## Amos69 (May 17, 2019)

Jon Stoppable said:


> And don't be surprised when they tell you the same thing. And then maybe recommend a trust instead.
> 
> I mean you could have asked your attorney in the first place, right? But you chose to ask UP.


Operating as an LLC does a lot more than protect you from yourself. For instance when a Bus T-bones your car and your client has significant injuries and there are injured part is on the bus too, there will be lots of stakeholders and lots of lawyers and everyone is going to get sued including yourself. OR Your LLC. Your choice. All things legal are flexible to say the least and even though the bus hit you there will be lawsuits against you and you could garner some culpability.

There are lots of situations. You run over someone's $20,000 dog who is running across the street. You were going 21 in a 20. Should you have to sell your house to pay that bill?

You are right though that having a trust to operate your LLC's through is a wise decision. I have a trust which operates all 6 of my LLC's. If you are going to open a trust, do it in Nevada, as they have the strictest laws governing piercing the corporate veil.

I think it is folly for anyone with assets to drive RS and not protect themselves with an LLC. In the state of Washington it is less then $100 to open an LLC and then less than $100 to attain licenses. Yearly I pay $72 to operate this company.


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## Jon Stoppable (Dec 11, 2019)

Amos69 said:


> here will be lots of stakeholders and lots of lawyers and everyone is going to get sued including yourself. OR Your LLC. Your choice


Not your choice, the plaintiffs' lawyers' choice. They are going to sue you and your LLC.


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