Mr. LLC stands there with a shield ready to protect your personal stuff like your home, car, savings accounts, boats, and other things from lawsuits and creditors. If someone sues you for something Mr. LLC’s employee did and wins the case; if Mr. LLC signs a contract with another company and that company sues Mr. LLC for breach of contract; if one of the other members commits malpractice or is personally negligent; in all these cases Mr. LLC protects your personal stuff. Mr. LLC can be your best protector and defender.
This is pretty powerful stuff, but Mr. LLC can’t protect you from everything. There’s this big misperception that if you set up an LLC you automatically have all this super-powered protection from all lawsuits. That’s not true. You’re still liable for your personal misconduct. That’s why it’s always good to talk with your insurance agent to get insurance.
There’s another thing that Mr. LLC can’t protect you from and that’s disputes between members or between members and managers. Once again it’s a good idea to talk with your insurance agent about this. You’ll also want to include some sort of dispute resolution procedure in your operating agreement to help resolve these disputes.
You’ll also find that unless your LLC is financially sound, your bank, landlord, and others will require you to sign a personal guarantee. This allows that person to seize your personal assets to pay off your LLC’s debts.
Overall Mr. LLC is pretty powerful, but I wouldn’t call him superman. Sorry Mr. LLC.