LLC protect retroactively?

[AvalonRose]

In the state of California.

Does an LLC protect retroactively? Started a business with no LLC, had a minor conflict with someone that will probably result in nothing, however, would like protection just in case. Looking at picking up an LLC and wondering if it will protect if the person moves forward in a legal attempt months or year from now.

Thanks

 

[tranquility]

It does not protect, but could make collection harder.

 

[AvalonRose]

so if taken to court in 6 months the LLC I picked up today wont keep my personal assets safe? I could still be personally sued? what do you mean when you say it could make it harder?

 

[latigo]

so if taken to court in 6 months the LLC I picked up today wont keep my personal assets safe? I could still be personally sued? what do you mean when you say it could make it harder?

Of course you could be “personally sued”! If you weren’t anticipating being “personally sued”, what would be the purpose of this ill-conceived scheme to hide your assets?!

BUT before you think about forming an LLC to keep your “personal assets safe” from the hands of creditors, I strongly suggest that that you study California’s Uniform Fraudulent Transfer Act (Cal Civil Code Title 2).

And this "troubling feature" of the California Penal Code:

Section 154. (a) Every debtor who fraudulently removes his or her property or effects out of this state, or who fraudulently sells, conveys, assigns or conceals his or her property with intent to defraud, hinder or delay his or her creditors of their rights, claims, or demands, is punishable by imprisonment in the county jail not exceeding one year, or by fine not exceeding one thousand dollars ($1,000), or by both that fine and imprisonment. (b) Where the property so removed, sold, conveyed, assigned, or concealed consists of a stock in trade, or a part thereof, of a value exceeding two hundred fifty dollars ($250), the offense shall be a felony and punishable as such. (Emphasis mine)

 

[AvalonRose]

^ not sure what you assume is going on, but Im having a tough time figuring out how your statement above even applies. Im not trying to hide assets... I have nothing but a 4K car that is paid off. My business I just opened is worth $0.00 // Just so happens that a shady guy is threatening me with some form of legal action. Although I doubt his claims are likely to hold up in court anyhow... or maybe what hes doing is illegal? this is all new territory for me. My concern, and reason for asking this question, is that I opened a business without protection. Now its got me worried my spouse/family could somehow be pulled in and things that have been worked for could be at risk or something?? I dont understand the laws when it comes to all that. I'd like to keep the business separate from my personal. MAybe I am wrong in assuming the LLC does that. I was reading about it online today and that was the understanding I had.

Thanks for your reply though.

 

[FlyingRon]

It's easy to THREATEN legal action. It's a bit harder to actually file suit and harder yet to prevail.

Forming the LLC won't do anything to stop that. Even if you had the LLC from day one, you could still be personally sued.
Whatever you envision to do with the LLC to obscure responsibility for your actions outside the LLC, is likely to be viewed as described above.

 

[latigo]

^ not sure what you assume is going on, but Im having a tough time figuring out how your statement above even applies. Im not trying to hide assets... I have nothing but a 4K car that is paid off. My business I just opened is worth $0.00 // Just so happens that a shady guy is threatening me with some form of legal action. Although I doubt his claims are likely to hold up in court anyhow... or maybe what hes doing is illegal? this is all new territory for me. My concern, and reason for asking this question, is that I opened a business without protection. Now its got me worried my spouse/family could somehow be pulled in and things that have been worked for could be at risk or something?? I dont understand the laws when it comes to all that. I'd like to keep the business separate from my personal. MAybe I am wrong in assuming the LLC does that. I was reading about it online today and that was the understanding I had.

Thanks for your reply though.

Need I remind you that in a previous post you expressed concerns about “keeping safe your personal assets?

And that it is only now that you are talking about keeping the “business separate” from your personal assets via an LLC!

If it is the mere threat of a lawsuit that is worrying you and the subject of such a lawsuit would not involve a liquidated debt, or some past tortuous conduct on your part from which you could reasonably anticipated being charged with monetary damages, then it is not likely – or at least subject to question - that the either California’s UFTA or its Penal Code would come into play should you elect to transfer assets to the LLC.

But if you were to transfer assets into the LLC in anticipation of a judgment being issued against you for a legitimate debt or some past tortuous conduct (e.g. auto accident, etc,) the judgment creditor could move to have the transfer set aside as made in fraud of creditors. And then levy execution upon any of those assets (not exempt from execution) in satisfaction of the personal judgment against you.

Also, a judgment creditor could obtain a charging order by which any profits earned by the LLC would be made subject to satisfying such a personal judgment. Which is what tranquility meant when she wrote, “harder”. But ultimately more expensive for you.

 

[AvalonRose]

^ ok, I hear you on that. It wasnt my intention to move or hide anything. More a question of liability falling back on others [my family] not involved in the business. I didnt want to be at fault for something and end up losing everything over it. This was the first place I turned.

I sat down with a lawyer this AM and there is nothing of merit there and I he says am essentially just being harassed and scared by this person...