The first and most basic proactive measure you can take is to establish an appropriate entity, i.e., one of the business structures mentioned above. In addition, it is crucial to ensure that the documents governing the entity are meticulously drafted and specific to the needs of your business and partners.
However, simply establishing an entity alone will not protect against litigation. You must adhere to the entity’s formalities and guarantee that its documents precisely reflect your agreement with your partners; otherwise, you may face a lawsuit from your partners or a creditor. In such cases, having an LLC may actually become a liability rather than a benefit.