Legal Question in Business Law in Pennsylvania

Limited Liability Company Capitalization

I have a question

regarding a Limited Liability Company. A current sole

proprietor of a Flower Shop intends to form a LLC as

the only member, completes the formalities of

registering with the Commonwealth and also executes an

Operation Agreement with himself as the only member.

In addition to the tax benefits he wants the LLC to

protect his personal assets. The capital contribution

is identified in the Operation Agreement.

1. Is there any minimum requirement for the capital

contribution? One of the formalities for piercing the

corporate veil is under-capitalization.

2. If he owns the building, equipment and inventory

should it be listed as the capital contribution?

It seems to me that he cannot totally protect these

assets from a suit against the LLC and personal

liability. If the LLC is sued and the assets are

listed as the contribution and owned by the LLC then

they would be at risk and the limit of the liability.

If they are not listed and the LLC is sued would they

be at risk as a under-capitalization formality?

However, if he is sued personally would the assets of

the LLC be at risk because he is the owner (sole

member) of the LLC, which owns the assets?


Asked on 2/18/05, 12:25 pm

2 Answers from Attorneys
Mark Johns Mark Johns, Esquire

Re: Limited Liability Company Capitalization

If he is serving as the director he can be sued personally for his negligence along with the llc. You may be able to get around this with a lawyers help. I offer free consultations.

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Answered on 2/18/05, 1:23 pm
Gerald Hershenson Law Office of Gerald M. Hershenson

Re: Limited Liability Company Capitalization

The is no requirement for a minimum amount for capital contribution. Unless the asset ownership was actually conveyed to the LLC, it would not be subject to attachment for actions of the LLC. There are several scenerios that can be arranged. However, they are many more factors that one must consider. You have some concerns that may not apply. The best approach is to seek professional advice. Good luck. Gerald Hershenson 215-579-9390

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Answered on 2/18/05, 1:57 pm


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