Archive for LLC 101

Limited Liability: What does it really mean? Part 1-Definitions

The term limited liability gets used often but without a full understanding of what it really means. Business people want it but perhaps are not really sure what it means. Most lawyers and other professionals think they know what it means too. But do they really know? This post and the ones that follow will examine this legal principle in some detail.

Whether you consult, Black’s Law Dictionary or the popular Wikipedia, you will find that it means that the owner/investor in the business entity can lose his/her investment but no more. In essence, the owner can lose what they invest no more/no less.

If the owner/investor is also active in the business, however, he/she is liable for his/her personal negligence. That is, if the investor/owner commits a tort within the scope of business he/she is responsible for it. Also, it is quite normal for investor/owners in small businesses to be a personal guarantor of business bank debts or other debts such as leases.

Thus, if the investor/owner  has not committed a tort nor personally guaranteed any debts, he/she will only lose his/her investment.

There may also be statutory responsiblities for certain debts that  will be discussed later.

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Introducing LLCs Made Easy- Wisconsin Style

My name is Joseph W. Boucher. I have been practicing business law in Madison Wisconsin since 1978. During that time one of the most significant business legal changes has been the addition of LLC’s. My personal interest in them began when I was an editor of the National CPA exam during the mid-1980’s. A colleague shared the information on LLC’s which had then been approved in Colorado after starting in Wyoming in the late 1970’s. Having seen my father and father in law operate as sole proprietors because of the barriers they perceived to using either C or S corporations, I realized that LLC’s were a huge benefit to them and those like them. We formed a committee in Wisconsin in the early 1990’s, which I chaired, to draft Wisconsin’s law. Wisconsin’s law was passed in  1993 going into effect January 1, 1994. Starting with a small percentage, LLC’s are now over 80% of the new businesses formed in Wisconsin.

As part of the legislation, we saw to it that the state agency regulating business formations created an online process to form LLC’s. This process is very popular. Forming an LLC in Wisconsin, is easy and less expensive online. You can go to www.wdfi.org to begin.

For further discussion, please see LLC’s 101 on this blog.

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