Dear Mr. Ethics,
My partners are telling me we should be forming limited liability corporations for every project we do. They tell me that these “L.L.C.’s” will legally protect our personal assets and the assets of our regular company. They say our only risk is the assets that are in the L.L.C. for the project. Basically, if something goes wrong, we can walk away without much worry. I really like that idea but it kind of feels that in a bad situation we will leave others holding the bag. Can you give me some insight?
Regards, Undecided Partner
LLC’s have been around for decades and are perfectly legal. Those contracting with LLC’s generally know what they are about. So there is nothing wrong with forming LLC’s as a project delivery vehicle. Ethics come into play when the LLC is deliberately underfunded for a project. This is often done to allow the LLC to draw off the profits from the project and then leaving the remaining parties to fund the project and claims that will arise. Consult legal counsel about the pros and cons of a LLC and then use it properly if formed.
Regards, Mr. Ethics