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Carefully scrutinizing the most appropriate business structure before venturing into the business world is a must-do for those who want to succeed in starting a small business. While they can choose from the common business structures like Sole Proprietorship, Partnership or Corporation, a Limited Liability Company is most likely the best choice for businesses that are seriously risky. Because of the limited liability feature of an LLC, most entrepreneurs are advised to organize an LLC business where the assets of a Limited Liability Company cannot be taken away by creditors to satisfy the personal debt of its members. In the same manner, the personal properties of its members cannot be used to pay off corporate liabilities and are free from confiscation. In Tennessee, the only legal remedy for personal creditors to collect from LLC members is through a Charging Order. It is an order by a competent juridical entity directing the LLC manager to pay the creditors of the debtor-member. Generally, the court orders the payment of the debtor-member’s personal liability based on the profit and interest attributable to his membership in the LLC. However, the creditor cannot order the distribution of the amount subject to the said order. To some creditors, this remedy is futile. To a hopeful few however, the financial rights over the LLC Member-debtor is enough. Even if the LLC members enjoy the protection from personal liabilities, this provisionis not absolute. There are incidences which, if indeed proven, render an LLC member personally liable and the limited liability clause of LLCs may not make a good defense. The guarantee generally given to LLC members may be rendered ineffective in the following instances: • If the LLC Member, through the course of his personal activities, personally and directly injures a person, damages a property, or prohibited the exercise of a person’s rights, he will be personally liable. His personal liabilities will therefore be determined by a competent court or an authorized institution which has jurisdiction over the activities involved. • When an LLC member-manager guarantees a loan in his personal capacity and the LLC defaults, the member will be held personally liable. If he fails to file taxes which are withheld from the salaries and wages of the employees, the member-manager will incur personal liability. Judgment on these two offences, however, is different and will be addressed by governing authorities. • If a member causes harm against someone or causes damage to the company through his fraudulent practices or acts prohibited by law, he is likewise personally liable. If you are looking for information on personal liability of LLC members in Tennessee, click on the link. Or you can visit http://www.ezonlinefiling.com/.
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