The Basics Of Funding A LLC
I am not an attorney, I am a Judgment Broker. This article is my opinion, from my experience in California, and laws are different in each state. If you ever need legal advice or a strategy to use, please contact a lawyer.
LLCs are now very popular because they are more versatile than conventional C or S corporations, and LLCs offer more taxation choices for the owners.
Corporations provide their owners and shareholders very good liability protection.
LLCs may offer their owners even more liability protection than S or C corporations enjoy. The additional liability protection is a reason you should be careful if lending or investing assets with a LLC.
When a LLC makes money and succeeds, life will be good, and they'll very likely repay you what they agreed to pay you.
When times are bad, or the LLC is not making money, or if owners and/or management is not honest, then you may have to sue the LLC to attempt to recover what is owed to you.
Suing a corporation is usually tough because the owners and shareholder are rarely liable for any corporate actions.
Suing LLCs is usually harder, because in many states, a charging order (in California, CCP 708.310) is the only way to attempt to reach a (judgment debtor) LLC's assets.
Because of the potential additional risks in funding a LLC, there are three points you should consider, before investing or lending assets in one:
1) Obtain personal guarantees from the owners of the LLC, particularly if the LLC is small or new.
With signed and notarized personal guarantees in place, owners will have an incentive to be extra careful and manage your money right. If things go south, it is much easier to recover a judgment against an individual, than a LLC.
2) Buy UCC liens on every asset the LLC owns, including computers, accounts receivable, etc. UCC liens are available through a Secretary Of State.
To be most effective, UCC liens should identify specific assets. UCC liens might not get you paid, however they increase the odds.
3) Check the LLC's status at a Secretary Of State's web site, and make sure the status is ACTIVE, which means they paid their taxes and are registered with the State.
Make sure the LLC has a current fictitious name (DBA) filing active in the county they are based in, a business license in the city they are based in, and you find out which bank account they use.
Of course, when the LLC has been around for years, and has plenty of income, and you know the owners, you may feel more comfortable investing or lending.
Remember, corporate entities can disappear overnight, and LLCs are usually hard to collect from, if you need to sue them.
About the Author
http://www.JudgmentBuy.com - where Debts and judgments quickly get recovered by an expert - matched expertly for free, to your debtor. Mark D. Shapiro, I pay for leads, and offer the best quality free leads for enforcers, collection agencies, and contingency collection attorneys.
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