LLC for Consultant?

by Chris
(Ohio)

You mention in your Veil Piercing section that one of the major downfalls to LLC protection is if you have little to no 'capital' invested in the LLC. If your main business model is Consulting (with little investment capital required), is it common to still obtain an LLC?

Answer

What is a "little" amount of capital is, of course, relative to the business you're in.

If you are starting a large manufacturing company and hiring hundreds of employees, that's going to require more capital than a consultant who might only have incidental office expenses.

Consultants and other low-overhead service businesses often choose that LLC format for its lower administrative burden than a corporation.

A thousand dollars in capital (with the rest of the startup money for the business in the form of loans from you to the LLC), could be sufficient. This amount could come in the form of, in the case of a consultant, office equipment/computer donated to the LLC for use in the business.

Veil piercing is an extraordinary remedy, and not lightly used by the courts. You really have to be a bad actor--e.g. committing outright and blatant fraud--in order to have your LLC's veil pierced.