The mistake people make is that people look for absolute answers. There are no absolute answers, only probabilities.
I agree with Oscar to keep the LLC active on paper. It makes good sense. But honestly, the only thing (in a practical sense) that keeps an LLC active is simply paying the annual state fees. So, the minute a lawsuit hits the LLC, YOU don't "shut down", "close", or dissolve the LLC. You let the state dissolve it for you which generally happens automatically when you don't pay your state registration fees within a specific period of time.
Meanwhile, you go start an other LLC and operate from there. Or at least have it ready on standby in case you need to move quickly. Most people are not very creative thinkers. People can have multiple LLC's, corporations, etc. registered at the same time. Yes, it costs a bit more in annual registration fees but it is cheap insurance. It also allows you to maneuver much easier.
Most lawyers are not very creative either and tend to think very linearly. They also have certain professional rules that are binding upon them that are not binding upon civilian non-lawyers. And they always harp about piercing the corporate veil. What they don't tell you is that it isn't automatic, it isn't always easy, and it costs money to do so.
And even if you got sued personally, there is a strategy to deal with that. You create an LLC and transfer all your funds and "invest" all your money into your business and become "personally broke". I have a friend who ran his business and personal finances for years using a variety of corporate entities simultaneously. He made himself personally broke by not having much in his personal name. Essentially, he had no money in any personal savings or checking accounts. IRA's and other retirement accounts are not touchable.
There are also corporate entities that can own other corporate entities. There are also trusts that can be used. There can also be "partnerships" of an individual with a corporate entity. There can be "partnerships" between 2 or more corporate entities.
Obviously, for most small entrepreneurs, it is impractical to execute some of this due to cost, complexity, and reporting issues but in theory, a LOT can be done if one is determined to not be victimized by a copyright extortionist or any other litigious party.
What I discuss here are NOT recommendations for anyone. They are DISCUSSIONS of interesting strategies designed to broaden your mind. They come with both pros and cons. There is theory and there is street tactics. I try to make sure whatever theory I operate on is grounded in street execution and street results as well.
Matthew,
Interesting that you suggest this type of strategy. I am already implementing this very same strategy in Getty's claims against my LLC. Luckily (for me), my LLC's income had already been transferred many years ago. So my LLC now has virtually no income and zero assets. My LLC is a convenience, but not a necessity. The only reason I am keeping the LLC open is because Oscar said that if I close the LLC to avoid a suit, then there is a possibility of Getty going after me personally. I was not aware that the protective veil of an LLC could be pierced like that, so that's good advice from Oscar and may be worth adding to your post............
Regards, Dave F.
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) claim that Patel states to be an unknowing party