Need help! Single Member v. Multi Member LLC

[drewshirley]

Thanks Mark, I thought a single-member LLC was a "disregarded entity" by the IRS, no? Do you have to elect S-corp taxation?

[mcwagner]

yes, it requires an overt election.

[Dave T]

Drew,

A sngle member LLC defaults to a disregarded entity unless the taxpayer has elected corporate tax treatment.

A multi-member LLC defaults to a partnership, unless the members elect coporate tax treatment.

In community property states, when a husband and wife are the sole members of the LLC, the LLC defaults to a partnership unless the members have elected tax treatment as a disregarded entity or as a corporation.

[HoldAndBuy]

In case anyone here is interested, I asked the attorney I saw whether the manager of an owner-managed, single member  LLC (i.e. doing your own property maintenance instead of using a PM) could be sued individually for something that occurred at the property. He told me no, they cannot do that, they can only sue the LLC.  So that should provide some reassurance.

[BLL]

In case anyone here is interested, I asked the attorney I saw whether the manager of an owner-managed, single member  LLC (i.e. doing your own property maintenance instead of using a PM) could be sued individually for something that occurred at the property. He told me no, they cannot do that, they can only sue the LLC.  So that should provide some reassurance.

He's saying you have no personal liability for your own personal actions that cause an injury if you are acting on behalf of the LLC? You could run a red light on the way home from the Home Depot getting supplies for the LLC, kill someone, and you aren't personally responsible? You have a good case for malpractice if he tells you that. There is no limited liability for personal actions. If your personal actions cause an injury, you are personally responsible, regardless of any entity involved.

[HoldAndBuy]

The example we discussed was if the tenant had a slip and fall accident in the house and was injured. He said they would have to sue the LLC, not me personally.

[BLL]

The example we discussed was if the tenant had a slip and fall accident in the house and was injured. He said they would have to sue the LLC, not me personally.

You would be personally liable if you had a duty to maintain the area where the tenant fell and did not do so. You are not automatically liable, but nothing says you can't be sued personally along with the LLC.  Everyone gets sued: the LLC, the  manager, the owner, and anyone with just a tangential relationship to the area where the tenant fell.

[HoldAndBuy]

hmm, well I don't know what to believe now. He was very insistent that they could not sue individually in that situation.

[BLL]

hmm, well I don't know what to believe now. He was very insistent that they could not sue individually in that situation.

Anybody can sue anybody else for anything. Whether it gets dismissed or goes to trial is another matter. Just remember this basic fact about liability. If your personal actions caused the injury, you are personally responsible. It's that simple.

Entities don't change that fact.  Acting on behalf of the business doesn't change that fact. Entities don't provide some magic shield for you. The liability isn't transferred from you to the business. It is extended to include the business. Google the term vicarious liability for a better understanding.

Do your own research to learn what constitutes liability. Stick to legal sites and places that aren't trying to sell you something.