I am not a lawyer, but I've been in business long enough and have been through enough legal issues to know that forming an LLC isn't sufficient to keep you from getting sued personally or having the corporate veil pierced if someone wants to come after you. In this regard, the parent posters are correct - there may be good reasons for you to form an LLC, but legal protection is a grey area.

> having the corporate veil pierced if someone wants to come after you.

The creditor wanting to pierce the veil is, unsurprisingly, not a sufficient legal condition for piercing the corporate veil, otherwise corporations and LLCs (not just California and not just single-member) would be worthless.

Of course, a sloppily-run LLC is more likely to result in piercing the veil, and a single member LLC that the owner views as a maintenance free magic shield is particularly likely to be sloppily run.

It still doesn't stop someone from suing you personally. Anyone can sue anyone for any reason. You can try to claim "it was the business's fault" but if you're a single member LLC (with no employees) this is very difficult -- but not impossible -- to prove.

I'm not a lawyer, but this happened to my dad a couple of times in his life. The first time, he lost control of his business and had to declare bankruptcy. The second time, it was dismissed.

Edit: For those curious. Having "policies" written down and following those policies to the letter will save you if you are ever personally sued for something your business does.

> It still doesn't stop someone from suing you personally.

It vastly reduces the expected value to them, and thus the incentive, and the expected cost (legal and liability) to you, but no, it's not an absolute shield.

> . You can try to claim "it was the business's fault" but if you're a single member LLC (with no employees) this is very difficult

Well, yes, but the problem with that isn't “single-member LLC” (for which the standard is pretty much the same as any other limited liability entity) but the “you’re” part: a key requirement of maintaining limited liability is that the entity is operated as a distinct thing from the principals. If you view yourself as not distinct from the LLC—that the LLC is something you are and not something you have or operate—that's a pretty good sign that you are thinking about it wrong from the start.

> but the “you’re” part

Very subtle catch. I meant “you have” but still, I wish I could give you more upvotes.

>Of course, a sloppily-run LLC is more likely to result in piercing the veil,

And unless you happen into some money tree-esque line of work it is going to be damn near impossible for a one person LLC to not do things that will get the veil pierced, especially in a business unfriendly regulatory environment where the small businesses are already spread thing by other requirements. The plumber who is unwilling to use his van as a personal vehicle and use his personal checking account as his slush fund is going to get out competed by the plumber who is. The vast majority of single person LLCs simply do not have the luxury of having enough cash on hand to separate things to the extent necessary to be protected.

> The vast majority of single person LLCs simply do not have the luxury of having enough cash on hand to separate things to the extent necessary to be protected.

If you don't have the ability to operate a distinct entity, you shouldn't choose the business form designed for that express purpose and offering benefits conditioned on doing so.

I don't know that the vast majority of single-individual LLCs are actually doing it wrong, though, especially in California where the required cost at least encourages some thought about what you are going to get out of it that justifies it.

Unless you're especially sloppy, it's virtually impossible to "pierce" the corporate veil. It almost never happens. However, if you have a business that could be sued (ie AirBNB rental), and you have a lot of personal assets, then an LLC is a good idea IMO.

If you’re at the level you’re just starting out, there’s a good chance your home is your biggest asset. Forming an LLC won’t let you borrow money with no collateral, so there’s a good chance your gonna have to expose yourself to personal risk. If you have to put your home up as collateral, an LLC may not give you much.

My personal experience was that banks will start treating your LLC as an entity that isn’t an extension of you when you start getting up to a few million USD in revenue. Then you are likely to have assets like accounts receivable, signed contracts, inventory, etc. I may be wrong here, as I didn’t get to that level, but I remember conversations ending with “we can help you when you’re making 3 to 5 million.”

Well if you sign over your home as collateral that's another story entirely. I think we're discussing something else from what I'm more concerned about, which is in regards to lawsuits.