What are the benefits of having an LLC?
As the name suggests, one major benefit of a limited liability company is the protection from liability that is available to managers or members of the company. See Bus. Orgs. Code § 101.114. Members are the persons who were given such designation in the limited liability company under its governing documents, and managers are the persons designated as such when the limited liability company is not managed by its members. See Bus. Orgs. Code §§ 1.002(51), (53)(A).
Regarding a member or manager’s liability, the statute states that, except for when a company agreement provides otherwise “a member or manager is not liable for a debt, obligation, or liability of a limited liability company, including a debt, obligation, or liability under a judgment, decree, or order of a court.” See Bus. Orgs. Code § 101.114. The statute’s purpose is to shield members, even in single-member companies, from the company’s liabilities and obligations except for in limited circumstances. See State v. Morello, 547 S.W.3d 881, 884-85 (Tex. 2018). One such circumstance when a member may be held personally liable for the company’s debts, obligations, or other liabilities is when a corporate officer knowingly participates in tortious or fraudulent acts, even if performed as an agent of the corporation. See State v. Morello, 547 S.W.3d 881, 884 (Tex. 2018). Another theory which may hold a member personally liable for the company’s liabilities is called “piercing the corporate veil,” and it is an extraordinary common law remedy available when the corporate form has been used to achieve an “inequitable result,” such as when a corporate officer uses the corporate form for personal purposes without regard to corporate formalities. See Chico Auto Parts & Serv., Inc. v. Crockett, 512 S.W.3d 560, 570-71 (Tex. App.—El Paso 2017, no pet.). In short, the limited liability company form provides broad protection to the members’ personal assets in the event that the company owes a debt, obligation or other liability. As discussed above, a member may only be held personally liable, in a few circumstances, such as the member’s own fraudulent or tortious acts, or abuse of the corporate form for personal purposes.
Registering your business as an LLC is a relatively inexpensive process and can be done quickly at our office. It’s an important step any individual should take when wanting to get into business, big or small. The Werner Law Group offers business consulting with our CPA on staff, Jim Hoffman and our marketing director, Michael Hughes.