Posted by george on March 14, 2006 at 18:28:38:
Huh? That’s not exactly what I said, or a valid formula.
Here’s the way things work in real life: Suppose your tenant is seriously injured in your property. He sues. You don’t get a choice to say, “sue my LLC, not me”. Both you and your LLC will be named respondents.
You go to court and are found liable for $5mm. The amount is almost irrelevant. After the suit, opposing attorney wants to know the limits of your umbrella policy. Say it’s $1mm. Assuming you have no fat bank accounts or free and clear properties, how much do you think they will agree to settle for?
You guessed it. $1mm. Once your insurance co. pays, the judgement is satisfied, and your financial and credit rating is as though the lawsuit had never existed.
The LLC did nothing to protect you.