Frequently Asked Questions
Why is it important to separate personal and business assets in a Massachusetts LLC?
Separating personal and business assets is a crucial aspect of running a Massachusetts Limited Liability Company (LLC). The primary reason for this separation is to maintain the limited liability protection that an LLC provides. This protection ensures that the personal assets of the LLC members are not at risk in case the business faces a legal judgment or incurs debts it cannot pay. When you form an LLC, it is considered a separate legal entity, distinct from its owners. This means that the LLC is responsible for its own debts and liabilities. If the business assets are not separated from personal assets, it could lead to a piercing of the corporate veil, which could make the LLC members personally liable for the business's debts and liabilities. To ensure this separation, the first step is to open a separate bank account for your business. This helps in keeping track of business income and expenses separately from personal finances. Additionally, applying for a business credit card allows your LLC to start building its own credit history. Moreover, when filing the Certificate of Organization, you must request an Employer Identification Number (EIN) from the IRS. This serves as a Social Security number for your business and is used to file state and federal taxes and to open a business checking account.
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