are single member llc's safe and a responsible choice for a small cafe?

by juanita
(ohio)

i was curious if single member llc's was a safe choice for a small cafe owner? the idea of having the llc to protect personal assets is comforting, until you see the chances of piercing the veil. Do many small restaurant and food handling businesses choose this type of llc- disregarded entity?

Answer

Piercing the corporate veil is an unusual occurrence, and typically requires active fraud on the part of the business owner.

Don't confuse "disregarded" entity with veil piercing, as they are entirely different concepts.

A disregarded entity is a tax term--it means that the IRS treats the LLC's income as your own. That's different from veil piercing, which is when a court holds an LLC member personally liable for the LLC's debts because the LLC member engaged in (typically) fraudulent activity to divert the LLC's funds to him/herself.

Some people (unwisely) run small food-service businesses as sole proprietorships. That's a very bad idea.

Many people run food service and other "physical" businesses as LLCs (as opposed to say, a consulting practice). Some of the biggest companies are LLCs--such as Chrysler. Ok, that might be a bad example :) But Chrysler's problem have nothing to do with being an LLC and everything to do with a lot of other factors that aren't worth getting into here.

The point is, both large and small companies use the LLC form of entity.