Last updated May 30, 2020

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What does an LLC protect you from?

**Short Answer: Set up a Legal Entity for your business so your personal assets are not at risk of being used to cover business debts and liabilities.**

Protect Your Assets: Form an LLC (2/11)

Video Transcript:

It’s important to set up a legal entity for your business so your personal assets are not at risk if your business gets sued. In this video, I will explain why. As entrepreneurs, we’re often told to think big and move fast. Thinking big is important to success, but moving too fast can often be dangerous, especially in the beginning. Many new entrepreneurs jump into their business way too quickly, overlook important details, and then they make costly financial and legal mistakes. These mistakes could seriously jeopardize the long-term success of your business. The biggest newbie mistake is not setting up a legal entity for your business. If you don’t create a legal entity, the law will view your business as a sole proprietorship, if there is one owner, or a partnership, if there are two or more owners. Both a sole proprietorship and a partnership leave your personal assets exposed. If a sole proprietorship or partnership is sued, the owner’s personal assets, like their home, cars, bank accounts, etc., are at risk of being used to settle business debts and liabilities. What are the options you have for setting up a legal entity? The most common legal entities that people know of are LLCs and corporations, but before we get in the details, it’s important to first understand their foundation. Let’s discuss what a legal entity really is. A legal entity is the same thing as a business entity, and we’re going to jump back and forth between the two terms in order for this discussion to make more sense. In the eyes of the law, a business entity is a legal person. In the eyes of the law, you and I are natural persons. A natural person is a living, breathing human being that functions independently and makes decisions on their own. A legal person only functions through the work and actions of natural persons acting on its behalf. A legal person is considered by law a separate and distinct ‘person’ from its owners. This separation creates a protective wall between your assets and the assets of the business. Therefore, this keeps your personal assets safe, if your business was to be sued. Think of a natural person as a regular human being, like you and I. Think of a legal person as a corporation like Microsoft or IBM, or even companies like your local grocery store or bike shop. Although a business entity is not an actual, living, breathing person, it still shares many of the same rights and responsibilities as you and I do. It can make money, it can own property, like real estate, boats, aircraft, enter into contracts and agreements, open bank accounts, it can sue and be sued, and pay taxes. Basically, the only thing a legal entity can’t do is vote in an election, run for political office, or do laundry. By setting up a legal entity, you are creating a business organization that can interface with customers, clients, vendors, and more, and, most importantly, by setting up a legal entity, you are keeping your personal assets safe. In the event of a lawsuit, creditors can only go after the assets of the legal entity, and that’s all they can get; they cannot get to your personal assets. Personal liability protection is the number one reason that people set up business entities. The two main types of business entities that people form are LLCs and corporations. We compare these entities in more details in our ‘LLC vs Corporation vs Sole Proprietorship’ video.

As entrepreneurs, we’re often told to think big and move fast.

Thinking big is very important to success…

But moving too fast can often be dangerous.  Especially in the beginning.

Many new entrepreneurs jump into their business way too quickly, overlook important details, and then they make costly financial and legal mistakes.

These mistakes could seriously jeopardize the long-term success of your business.

#1 Newbie Mistake

The biggest “newbie” mistake is not setting up a Legal Entity for your business.

If you don’t create a Legal Entity, the law will view your business as a Sole Proprietorship (if there is 1 owner) or a Partnership (if there are 2 or more owners).

Both Sole Proprietorship and a Partnership leave your personal assets exposed.

If a Sole Proprietorship or Partnership is sued, the owner’s personal assets (home, cars, bank accounts, etc.) are at risk of being used to settle business debts and liabilities.

So what kind of options do you have for setting up a Legal Entity?

The most common Legal Entities that people form are LLCs and Corporations.

But, before we get into the details, it is important to first understand their foundation.

Let’s discuss what a Legal Entity really is…

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Legal Entity/Business Entity

A Legal Entity is the same thing as a Business Entity, and we’re going to jump back and forth between the two terms in order for certain paragraphs to make more sense.

In the eyes of the law, a Business Entity is a “Legal Person”.

In the eyes of the law, you and I are “Natural Persons”.

A Natural Person is a living, breathing human being that functions independently and makes decisions on their own.

A Legal Person is only functional through the work and actions of Natural Persons acting on its behalf.

A Legal Person is considered by law a separate and distinct “person” from its owners.

“Protective Wall”

This separation is what creates a “protective wall” between your assets and the assets of the business…therefore, the LLC keeps your personal assets safe if your business was to be sued.

Think of a Natural Person as a regular human being like you and I.

Think of a Legal Person as a Corporation like Microsoft or IBM, or even companies like your local grocery store or bike shop.

Although a Business Entity is not an actual living, breathing person, it shares many of the same rights and responsibilities as you and I do.

What Can a Business Entity Do?

– make money
– own property (such as real estate, boats or aircraft)
– enter into contracts and agreements
– open bank accounts
– it can sue and be sued
– pay taxes

Basically, the only thing a Legal Entity can’t do is vote in an election, run for political office, or do laundry.

By setting up a Legal Entity, you are creating a business organization that can interface with customers, clients, vendors and more.

Safeguarding Your Assets

And most importantly, by setting up a Legal Entity you are keeping your personal assets safe.

In the event of a lawsuit, creditors can only go after the assets of the Legal Entity, and that is all they can get…

They cannot get to your personal assets.

Personal Liability Protection

Again, personal liability protection is the #1 reason that people set up a Business Entity.

If you don’t create a Business Entity, the law will view your business as a Sole Proprietorship (if there is 1 owner) or a Partnership (if there are 2 or more owners).

Neither a Sole Proprietorship or a Partnership will protect your assets.

Remember, if a Sole Proprietorship or Partnership is sued, the owner’s personal assets are at risk of being used to settle business debts and liabilities.

If you first create a Business Entity and your business is sued, then the courts can only go after the assets of the business (not your personal assets).

Forming a Business Entity creates a “shield of protection” between your business and your personal assets.

The two main types of Business Entities that people form are Corporations and Limited Liability Companies (LLCs).

We compare these in more detail in the “Sole Proprietorship vs. LLC vs. Corporation” section.

Matt Horwitz
Founder & Educator, LLC University®
Forming an LLC shouldn't be so complicated. Our step-by-step guide will make the process a breeze – and no complex legal jargon! LLC University® teaches people how to form an LLC for free in all 50 states. We hope you find our free guides and resources helpful in your business journey.

59 comments on “LLC Asset Protection”

Disclaimer: Nothing on this page shall be interpreted as legal or tax advice. Rules and regulations vary by location. They also change over time and are specific to your situation. Furthermore, this comment section is provided so people can share their thoughts and experience. Please consult a licensed professional if you have legal or tax questions.

  1. I filed my LLC name but don’t have plans to start a business yet, was that a mistake?

    • Nope, not at all. This is very common. Just speak with an accountant in case you have to register/file with your state’s Department of Revenue (or similar body). There is a chance you may need to file a return, but it’s also likely that it’ll just be “zeroed out” if there is no business activity. Hope that helps.

  2. I already have a resale license in my state. I did it under sole proprietor.
    Now I want to form an LLC. Should I redo my resale? Is it included with
    the LLC? I’m not sure what to do. After watching your videos (very informative) I know I don’t want to be sole pro. any more.
    Help!

    • Hi Liz, the resale license is not included with the LLC. Yes, you’ll either need to apply for another resale license or you may be able to transfer the license from yourself to your LLC (after your LLC is formed). Please call the office that issued your resale license and see if they have a “transfer”. Hope that helps.

      • Hello! We have three vacation rental properties. Each has its own retail license from the State of SC. There is one business license for the three from the city. I would imagine I need to apply for a LLC for each property separately. Would each retail license need to be changed or transfered to reflect the LLC? A business license is required if there are more than one vacation rental homes producing income. Perhaps I would still only need one business license to operate, however, the LLC’s would need to be listed? I sure hope I am making sense…thanks

        • Hey Patrice, if you form an LLC (or LLCs), transfer the property(ies) to the LLC(s), then yes, you’ll want to change your licenses so they reflect the new owner; the LLC. You can form 1 LLC and transfer all properties to that LLC, or you could form a separate LLC for each property. You’ll need to confirm with the municipality as to the specifics of whether or not a license would be needed, depending on how you setup the LLC(s). From what you’ve shared, it sounds like if you form an LLC for each property, then a license would not be needed. Again though, you’ll need to confirm with the municipality and governing body which administers the licenses as this reply here is fairly general and we don’t know the details. Hope that helps.

  3. Hi Matt

    How are you

    Great site, best site ever seen about LLC in all states, keep up the good work.

    Had question about what state you think is best for a Parent LLC to be formed it. You stated in one of your videos that you thought a parent LLC in Wyoming is the most popular.

    Can you tell me why you think that Wyoming is so popular as a parent LLC? I heard this too, but thought it was all marketing.

    Does Wyoming have anything different then other state for privacy concerns

    I wanted to hear the reasons from you because your a straight shooter and I know your not selling or marketing something. If you were doing up a parent LLC what state would you do it in?

    Matt thank you for your time, keep up the great work on this site

    Dave
    Chantilly, Va

    • Hey Dave, thank you for the kind words! Wyoming has strong asset protection statutes when it comes to charging order protection, for both multi-member LLCs and single-member LLCs (which is not the case in all states). Specifically, a charging order is the sole remedy for a judgment creditor. In other states, a judgment creditor can foreclose on your LLC interest and take over the LLC. In Wyoming, they’d only receive the right to a distribution (if there is a distribution). I know there are other aspects of the Wyoming LLC Act to consider, but our team has not fully researched them. At some point we’ll take a more comprehensive look and publish something on our website. In addition to Wyoming, I also know that Nevada, Delaware, Alaska, and South Dakota have strong statutes, however, the nuances and the pros and cons would be best discussed with a few attorneys. Hope that helps.

  4. I’m planning on setting up an LLC in California, and then having multiple DBA’s under that. Is that ok to do, and if so when using DBA names (for different products or services) legally do I have to also indicate LLC name?
    thanks.

    • Hi Craig, yes, an LLC can have multiple DBAs. In any legal context, you’ll need to include the entity name as well as the DBA. Hope that helps.

  5. With regard to personally owned vacation homes and occasional short-term rental through a LLC: Can a LLC provide a “rental service” to a sort-term vacation renter and “procure the service” from the owner of the property. Hence, avoiding the need for the LLC to own the specific property asset? My property has a personal mortgage in my name and I imagine it will be a challenge to get a business mortgage. What are your thoughts on this?, or is there no way to separate the rental business from my personal affairs unless the LLC “owns” the property?

    • Hi Haydn, likely no, since the party sued is the property owner, in addition to management, if suing party legal counsel believes they are also at fault. I recommend looking into a quitclaim deed and speaking with a few real estate attorneys. If advisable for your situation, a quitclaim deed allows you to keep the mortgage in place, but shift ownership of the property from yourself to your LLC. Hope that helps.

  6. Matt thank you for your very useful information. I have an LLC in New York. But I would like to know how to set up a holding company and save money and make money without earning money?

    • Hey Taverne, you’re very welcome. A Holding/Subsidiary LLC is rather easy to set up. You form the Holding LLC (aka Parent LLC) first and then you form the Subsidiary LLC (aka Child LLC) second. The LLC Member (owner) of the Subsidiary LLC is the Holding LLC. This may be listed in the Articles of Organization (or equivalent), but not all states ask for Member’s information in the Articles of Organization, so in that case, you’d simply list the owner of the Child LLC in the LLC Operating Agreement. It’s also a good idea to sign a Statement of LLC Organizer if you’re signing the Articles of Organization to appoint the LLC Member (it helps “connect the dots”). As far as making money without earning money, not really sure what you mean (sounds like skipping out on taxes), however, that’s a conversation to be had with an accountant. Hope that helps!

  7. Hi Matt,

    I am in a peculiar position. I am a teacher and I want to bring a music group to play at my school for an evening concert. I am able to rent the space as an individual from the school but this is not a school-sponsored activity. The music group wants to enter into a contract with me — I provide the space and they perform the music. I’m afraid to be held liable in case anything goes wrong. (They are selling tickets and earning money but I am not involved in the money side of this.) Should I consider establishing an LLC that signs the contract with them? This way if anything does go wrong I am not held liable. What do you think?

    Thank you in advance for your response!

    • Hi Jenifer, you certainly can form an LLC for special occasions like concerts. Somewhat related, LLCs are often formed for movie productions. That’s the closest example I could think of. Hope that helps.

  8. I filed a LLC with Florida with effective date of January 1. I will not be offering any services until January. Does this mean I have to wait until January to set up the business (acquire computer and office supplies, file for EIN and open bank account)?

    • Hi Paul, you can apply for your EIN since you can list the start date as January 2019. With your approved Articles of Organization and your EIN Confirmation Letter, you should be able to open an LLC bank account. Just call the bank ahead of time and ask to speak with the branch manager. Explain your situation. You should be able to open the bank account. Hope that helps.

  9. Hi there Matt!

    I have been in the retail business as a sole proprietor for 15 years. I have a amazon, eBay and Etsy store. I want to form a LLC now to protect my personal assets. My question is this…I need to know if I would be required to register my business in all the states that I currently have sales tax nexus in ( due to having products in amazon warehouses in various states) to meet the foreign requirement? I sure hope not. I will be collecting sales tax now in numerous states.

    Thank you so much for your time and any help!

    Laura
    Ohio

    • Hey Laura! Great question. Usually no, you don’t have to register your Ohio LLC where you have sales tax nexus. Where to register an LLC comes down to where you’re “doing business”. However, some states may require an “Entity ID Number” or similar (from that state) for certain registrations… therefore a Foreign LLC registration may be needed. It’s hard to answer that for sure as we don’t deal with a ton of sales tax stuff. Hope that’s somewhat helpful.

  10. Can I make and appointment to meet with you if you are in Pa.I have several question regarding asset protection.

    • Hi Carolina, we don’t offer in-person meetings. While we appreciate the request, we get far too many questions to accommodate something like that. Thank you for your understanding.

  11. Should I put down my home address on the articles of organization. I do not want to have a liability exposure if the business is dragged into court and my home is listed on the article of organization. Is the home considered property of the LLC because it is listed on the articles of organization?

    • Hi Adam, no, your home is not considered property of the LLC unless you actually title the home in the name of your LLC. If you’d rather not use your address for privacy reasons, you can use the address of a Registered Agent company. If you go to our homepage, select your state, then click on “Registered Agent”, you’ll find details on that. Hope that helps.

  12. Hi Adam,
    My spouse and I are purchasing a house in Hawaii where our child goes to college. She will live in the house with roommates and sometimes we’ll stay there too. We live most of the year on the mainland. We have a trust and our mainland home is in it. We had been planning to put the Hawaii house in the trust too, but then started thinking about LLCs. However that house will be home to our daughter and eventually us as well. We want to protect it too! Can we make an LLC with just the rental income and mortgage expense, and leave the house outside the LLC, in the trust, to protect it? If not is there some other way to achieve that goal?

    • Hi Jessica, you can make a trust an LLC Member. Exactly how to structure things (as there’s a few ways to do it) would be a conversation best to have with a local attorney. Trusts are a bit outside of our wheelhouse at the moment. Hope that helps and thanks for your understanding.

  13. If we own rental property and use a rental agency to advertise, lease and collect rents, do we still need to form an LLC to protect our personal assets? Thanks!

    • Hi Jane, you don’t have to form an LLC. As in, it’s not required. Are you asking that if by hiring a rental agency, your personal assets are protected in case of a lawsuit? If so, no that is not the case. Since you own the rental property personally. The LLC would nee to own the rental property (not you) and the LLC would be the named party in the management agreement, among other things. Hope that helps.

  14. Hi Matt,
    I have an LLC for my business. And have a revocable living trust with my home, car, and other assets. Should I open another LLC and put my trust into the LLC, to protect all my assets if my business gets sued? I am also going to get business product insurance for extra protection.

    Thank you

    • Hi Marcie, if your LLC is sued, your assets (whether or not owned by a your Revocable Living Trust) are separate from those of the business. Hope that helps.

  15. Hello,
    I did not see an article pertaining to this issue, but if I were to sign a document or contract in name of my LLC. What is the appropriate title and signature block to use? I have seen varying opinons on this. My LLC is based in CA.

    Not sure if I have to use a specific name like Member or Managing Member. Or if I can freely use CEO, president, or principle.

      • This my LLC I 100% own as the sole member. Could I use Member or Managing Member?

        • Hi SD, you can actually use any of the titles mentioned, depending on how your LLC is managed. If your LLC is Member-managed, you can use “Member” or “Managing Member”. If your LLC is Manager-managed and you are the Manager, you can use “Manager”.

  16. I established my LLC and my business is ecommerce. Can I obtain property and buy/sell real estate property with my LLC?

    • Hi BB, yes, you can. However, you may not want to “bundle” your liability. Meaning, if there is an issue in the eCommerce business, it could jeopardize your real estate (and vice versa). You may want to consider separate LLCs. Hope that helps.

  17. Hi Matt – Really appreciate this resource and have learned a ton from your content and postings. . Recently, a colleague shared his understanding to me of LLC protection, indicating it “only protected you in the state of Oregon.” This isn’t my understanding and I would appreciate your clarification. While Oregon is the legal state where I’m transacting my business, I have clients outside of Oregon and the US. If a law suit was brought to my LLC from outside Oregon, my understanding is that my LLC “protection” on my personal assets applies regardless of where my client is or the location where the lawsuit is originated.

    Can you please clarify for me?

    • Hi Dave, thank you! Awesome! Yes, you are correct. Your Oregon LLC offers protection regardless of the state in which the suit is brought. Hope that helps.

  18. Hi Matt,

    I have a question regarding LLCs. I have a rental, and Im planning
    on Quit Claiming it to and LLC, if I manage, collect rent and do all repairs, does the LLC really gives me any protection?
    or will it be better if I keep it in my name, have a landlord insurance policy and add it to my umbrella policy for extra liability insurance?
    Thanks.

    • Hey Mac, while you can be personally sued if you do something, if there is an incident that occurs at the property, ownership via the LLC will always be stronger (as opposed to ownership in your name). Then add insurance in addition to that. So instead of the question being “LLC vs insurance”, most will recommend an LLC + insurance. Hope that helps.

  19. Hi Matt

    I am planning to form an LLC and below are some of the open questions. Appreciate if you can answer the below open questions.

    1) Currently I reside in California and should I form the company in Delaware or Wyoming and register California as foreign state and do business or should I directly form it in California (I am trying to be on safer side and make use of the protective laws from Delaware or Wyoming to avoid any legal law suits in future) – Which one would you recommend?

    2) One Member( Me) would be in California and other member would be in another country. So can I go ahead and form a 2 member LLC with both members in 2 different countries?

    3) Will the LLC protect the personal assets of the foreign member (2nd member) personal assets in their home country in case of any law suits?

    4) I will have an LLC in USA and another entity in another country to run the business in that country. so in case if the business is sued, will the non USA entity assets will also be brought into the lawsuit or the person can only sue USA entity assets?

    5) Can that 2nd foreign member also be a director/owner for an entity in their home country to do business in both countries? (2nd Member will be part of USA entity and Director for home country entity)

    6) In Future Can I add additional member in the LLC?

    7) Also I need an director to run my business, in such case can I hire my wife in my own LLC and pay her salary?

    Regards,
    marku.

    • Hi Marku,

      1. If you form an LLC in Delaware or Wyoming and then register that LLC is California, if the LLC is sued in California (which is most likely), California law will apply. If you are looking for something more advanced, we recommend speaking with a few asset protection attorneys in California. With the business in California and you residing in California, it’s best to speak with California asset protection attorneys as CA laws will most often apply.

      2. Yes, there are no residency or citizenship requirements to being an LLC Member (as long as you don’t elect S-Corp taxation for your LLC). Please speak with an California accountant though, as you will likely need to withhold taxes for the foreign Member (federally and at the state-level).

      3. We are not sure about this.

      4. If the US LLC is sued, the lawsuit should only impact the US LLC and not the foreign, non-related entity.

      5. I don’t fully understand the question, however, I think the answer is yes. Your business partner can be a Member in a US LLC and also be a director/owner of another entity formed outside of the US.

      6. Yes. Existing Member(s) will need to sell or assign some of LLC membership interest (you can do that via an Assignment of Membership Interest) and then you can amend the Operating Agreement.

      7. Yes, you can hire your wife. It’s best to speak with an accountant about how to pay her, as there could be some advantages of one method vs. another.

  20. Happy New Year, Matt!!

    If I decide to utilize part of my personal home for my LLC business purposes and the tax deductions, would my personal home still be protected if I have an LLC?

    Regards,
    Tia

    • Hi Tia! Happy New Year :) Yes, your home will still be protected. The home (owned by you) is separate from the LLC, even though you are working from home and taking advantage of tax deductions.

  21. So, if I have a single member LLC, does that LLC have no liability protection? Since it files as a Sole Proprietor? Do I have to pay someone to be a member so I can get another member into the LLC?

    • Hi Tal, no. This often confuses people. A Single-Member LLC is taxed like a Sole Proprietorship by the IRS. This doesn’t mean the LLC is a Sole Proprietorship. Hope that helps :)

  22. Matt,

    Great site…. I see a lot of people inquiring if they use their personal home address in the articles of organization for an LLC the home is protected from liability claim. But what about bank accounts, personal investments, savings for the children’s college, personal autos etc… are they protected from liability? In essence everything not declared/owned by the LLC is considered personal and no liability is attached to liability claims if you are running the business (LLC) out of your home.

    • Hi Marc, thank you. Yes, correct. They are protected. Assets of the LLC are assets of the LLC. Assets owned by you are assets owned by you. Running the business from home doesn’t transfer ownership of your assets to the LLC.

  23. Hi.

    If a Nevada Corp./LLC is supposed to be anonymous, why are the officers/members listed on the entity search online for everyone to see?

    Thanks in advance

      • Hi Matt

        Your answer has nothing to do with my question. Is it anonymous or not?

        Thanks

        • Hi Pepe, the short answer is no, however, the longer answer is it depends. Meaning, an Initial List of Managers or Managing Members must be filed with the Articles of Organization and that list must also be filed every year. As per Section 86.263 of the Nevada Revised Statutes, all Managing Members (in a Member-managed LLC) or all Managers (in a Manager-managed LLC) must be listed in your LLC’s Initial List (same applies for the Annual List). Please see Member-managed LLC vs Manager-managed LLC for more details on the differences.

          So if your LLC is Member-managed, then the LLC is not private. If the LLC is Manager-managed, it depends. You can set up an LLC in another state to be the Manager. You can hire someone who doesn’t own the LLC to be the Manager. You can list yourself as Manager (shows you’re the Manager, but that doesn’t mean you’re the owner). You’ll also want to keep this in mind: if you’re doing business in another state and you form an LLC in Nevada, you’ll need to register your Nevada LLC as a foreign LLC in that state where you’re doing business. So you’d need to look at the foreign LLC registration process and that state’s LLC Annual Report filing to strategize regarding privacy. I hope that helps.

           

  24. Hi Matt,
    Thank you so much for this site! Not sure if you can help me, but…I have a single-member LLC in Illinois called Sodapop Home LLC for a small vintage home goods
    business, primarily on Etsy (online marketplace). I created the LLC for the liability/asset protection & set up a business checking account and business credit card under the LLC’s name. I am starting a second unrelated business (right now only on Etsy), and want to use a different shop name on Etsy. I’d like to try to sell something before I file a DBA or a second LLC (they’re costly), so I am trying to set up the second shop, let’s call it “Other Stuff” on Etsy under Sodapop Home LLC for the liability protection.

    However, etsy has a registration form that asks:

    “For tax purposes, what type of seller are you?
    Etsy will use this information to verify your information. This will not effect the status of your Etsy shop in any way and is just for us to know. Don’t worry, you can always update your seller type later.
    Option 1: Individual/Sole Proprietor (most Etsy sellers)
    Option 2: Incorporated business (Registered legal entity)”

    I tried Option 2. It attempted to verify my registered business using the business name, EIN, business registration ID (called File Number in IL), my name and legal address. I’ve tried 9 times to register both Other Stuff and my first shop as an incorporated business and it rejected it all 9 times, saying the business couldn’t be verified. I called the state, who suggested putting a “D” in front of the file number, but it didn’t work. I noticed a small discrepancy in the address (# vs. APT); I tried both, didn’t work. I’ve contacted Etsy several times and can’t seem to get any help other than “where it says EIN, enter EIN.” My LLC is in good standing & the numbers are all correct.

    I ended up selecting “Individual” for Seller Type, but used the EIN and business name of Sodapop Home LLC instead of my name and SSN. The billing/payment accounts are Sodapop Home LLC’s. My home address and business address are the same. I guess my questions are:

    1) Given how I have set it up now, could I have issues with liability/asset protection if I can’t manage to get Etsy to verify my registered business?
    2) Does it even matter since Etsy says the designation is “just for them” and for tax purposes, and I file my business taxes via Schedule C on my income tax (taxed as a sole proprietor)?
    3) Is it ok to wait a month or two to register a DBA or LLC for the second business?

    Even if you can’t answer, thanks so much for the valuable info here on the site!

    • Hi Jennifer, I’m not familiar with the Etsy interface, but based on the system declining your entry (and my assumption that they are modeling Form W-9), my guess is that Option 1: (Individual/Sole Proprietorship) means an actual Sole Proprietorship or a Single-Member LLC that is taxed as a Disregarded Entity > Sole Proprietorship. And that Option 2: (Incorporate business) means any legal entity not taxed as a Disregarded Entity (ex: an LLC taxed as a Partnership, S-Corporation, or C-Corporation). Feel free to send a ticket to Etsy if you want to verify that.

      Q1 & Q2: No, this doesn’t affect the liability protection of your LLC. Etsy needs to comply with US tax filing obligations, so they need to send 1099s. So this is just for tax purposes (again, likely something resembling Form W-9).

      Q3: Since you are operating “Store 2” under your current LLC, you can wait as long as you want to register a DBA or a 2nd LLC. Thank you for the kind words. You’re very welcome :)

  25. I’m really just learning about this. Do I have to declare a type of business. I’d like to create something that allows the 4 adult members of our family to be in an LLC. We may do business in multiple states so I understand a foreign LLC is what we need. One of our adults is in education consulting while another is in occupational therapy. Two of us are business consultants (or will be soon)….
    Also do we have to maintain a minimum of business to keep our LLC operational?

    I’ve just begun and love your website. Thanks for helping others.

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