Hello, this is Attorney Hunter Cavell in Solon, Ohio. And today I want to talk about you using a business to limit your liability.
Now in Ohio, it’s very easy to start a company, and usually they’re what’s called LLCs or limited liability companies. Now, why do people start companies? The main advantage is to, like the name says, limit your liability. So, if you go into business and somebody sues your business, barring some crazy exceptions such as fraud or corporate veil piercing, which I’m happy to get into later, they will only be able to sue the business, not you personally.
Now that sounds great, but what some people forget is once they set up one LLC, let’s say they’re involved in renting apartments, they may purchase multiple apartment buildings. Now the goal is to limit your liability. So, it really makes sense to have a different company for every property you own. That’s for instance, if somebody gets hurt on one apartment and they sue you, you want to limit the liability to the assets that that apartment may have and not unintentionally cross collateralize all your properties and have them all subject to liability.
So, what you need to realize is in Ohio, if you’re in business, you need to incorporate an LLC. Don’t just do a DBA or “doing business as” (that’s what’s called a legal fiction and people can still sue you). And when your business starts growing, what you want to have is eventually one LLC that acts as a holding company or owns all the other ones so that you limit your liability even further. Now, if you need help drafting these agreements or putting things in place, please give me a call 440-940-6441 or email me at [email protected] and have a great day.