LLC Loan Payments

[KBTS]

I got a new bookkeeping and tax client this week. He is a contractor that had been operating as a sole proprietor, but has recently formed an LLC. He is not electing to be taxed as a corporation - he just formed the LLC for liability issues. The business has two trucks and some other equipment that are financed in his personal name. His attorney has advised him to keep all this equipment in his personal name so that any suits against the LLC would not be able to get the equipment. As part of this, the attorney also advised the business write a check to the owner for the loan payments and then the owner should make the payments.

For tax purposes, since the LLC is ignored, I do not see that this would make any difference except to add the extra hassle of the check from the LLC to him – but I have never seen this before. Also, client is wondering if he drafted an agreement between the LLC and himself if he could have the LLC write the loan payment checks directly to the bank and still accomplish what the attorney is advising. Any help you can give me on this is appreciated.

[jainen]

question about liability

There isn't much of a liability shield for work he performs or supervises personally. If he gets sued, it will be as an individual in addition to the LLC. And if gets sued, the "extra hassel" for tax purposes will be trivial, and a self-imposed contract with himself will probably mess things up even worse.

The attorney is doing the best he can. If your client likes his attorney's advice, he should follow it. If he doesn't like it, he should get a different attorney. In any case, you are not the legal advisor, so stay completely away from any question about liability.