There needs to be a strict separation between the corporation and the people behind the corporation. As part of this, the LLC's finances need to be kept rigorously firewalled from personal finances — never pay a corporate bill from your own pocket, for example, or vice-versa.
You also need to follow the formalities of a corporation by keeping formal records (minutes, shareholder acts, etc.).
If you fail to do either of these things you, in addition to the LLC, can be sued, and you can lose personal assets. It's called 'piercing the corporate veil'. A great run-down is here:
This is true about all formal business structures. They should always be separate from your personal finances.
> You also need to follow the formalities of a corporation by keeping formal records (minutes, shareholder acts, etc.).
Not true. LLCs do not require the record keeping that corps require. The only formal records you need to keep are contracts / member & manager agreements.
This is more than "should." In an LLC, co-mingling finances can expose you to personal liability, which can result in personal financial disaster if you get sued.
> LLCs do not require the record keeping that corps require
We're both sort-of wrong on this one: the LLC record-keeping burden is far lower than a corporation, but the burden is not strictly limited to your list:
...in general, the law is much more complicated than one would expect. If you want to be safe, you should either be spending time reading NOLO's documentation or money paying a lawyer.
For example if you form a "single member" LLC, or a LLC with 1 owner, because LLCs are partnerships Court's will not protect the LLC from the single Owner's liabilities because there are no partners to justify protecting the business. So if the Owner has debts, the creditors can go after the the LLC as a asset to cover the debt.
So while anyone can set up an LLC easily on their own, as in this hypothetical it would have been worth the money to talk to an attorney before forming and have the lawyer advise to and another second owner and receive protection with the LLC or form a corporation instead of an LLC as a single owner.
In contrast, multi-member LLCs and Corporations (C or S; single shareholder or multiple shareholders) are protected from the personal liabilities/debts of Owners. In practice, if Person A owned Google Stock A's debtors can not go after Google and Google's assets to satisfy the debts; however, if A is also the Owner of a single member LLC those same debtors CAN get a charging Order, Economic Interest, or foreclose (take ownership) of the single member LLC and/or its assets.
Olmstead v. Federal Trade Commission