Why is Limited Liability Important?

John and his wife, Mary, own a flower delivery business. They’re equal partners, sharing decision making and other responsibilities 50/50. They own a small building downtown for their shop, near the two-story townhouse they bought together, and in addition to the family sedan also own a delivery van with “John and Mary’s Flowers” written in bold letters on the sides. The flower business, though, has slowed down in the past few years. And John and Mary can no longer make the payments on the loans they took out to start the business. After struggling to get by, they finally default on their loans. The bank repossesses the van, and forecloses on the store-front. But even doing that, they haven’t made enough back on the loan.

John and Mary have a “general partnership” – they have no liability protection. Without that protection, the bank could come after their sedan, and their home, to recover the losses on the business loans. As general partners, John and Mary are the business, and all their personal assets are therefore unprotected against creditors – be they banks or successful lawsuit victors.

There are ways to form a business to prevents this. Entities can be formed that limited personal liability of managers and owners, and such an entity would protect John and Mary’s personal assets from being seized. Entities like Limited Liability Companies (LLCs), Limited Liability Partnerships (LLPs), and Corporations are designed to protect their owners and managers from becoming personally liable for a company’s failure, or debts.

For a free, confidential conversation to discuss forming a limited liability entity and other business law matters, including business formation legal services, contact Maryland business attorney Stephen J. Reichert at 410-299-4959, sreichert@reichertlegal.com or by clicking here.

Day, evening and weekend appointments are available in office or at your residence. Mr. Reichert personally serves business law clients throughout the entire state of Maryland.

Stephen looks forward to assisting you with your Maryland business law needs.

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