Is it difficult? No. Does it require a little more work than a sole proprietorship? Yes. Below we will explain the benefits of forming a LLC and why engaging with an attorney to do so is beneficial.
1. What is a LLC? Limited Liability Company.
A LLC is a business entity that limits the personal liability of its owners, also known as members. Limited Liability Companies are a hybrid business model. It provides for the benefits of both a partnership and a corporation.
2. Why a LLC may be the best option for your small business?
Limited personal liability. All members of the LLC are protected from personal liability for actions done by the company. Therefore, creditors cannot come after the personal assets of the members in order to collect on the company’s debt. Think of a LLC as a bubble protecting the members. Members may be held liable is if that bubble is pierced. A strong foundation can prevent that.
Less complicated taxes. LLCs are “pass-through entities” meaning profits are not taxed twice. Members will only pay their individual income taxes rather than income being taxed at the company and individually level.
Ease of management. The business owner(s) can choose the management structure of business. Owner can choose who is named as a member and how much control they will have over the business. Additionally, LLCs are not required to make annual reports or hold annual meetings to maintain their status. The recordkeeping requirement is drastically less than a corporation.
Profits distributed as member(s) see fit. Members choose when profits are distributed and how much, unlike a corporation which is required to distribute profits based upon the number of shares an individual holds.
3. Why engage an Attorney to start your LLC?
Attorneys help structure your business properly. An attorney will structure your small business to best fit your needs. Attorneys help create formation documents such as bylaws, article of incorporations, and owner agreements to make it clear how your business operates. Additionally, Attorneys ensure that your business is formed properly to help protect members from personal liability. If a LLC is not properly structured, creditors may “pierce the corp veil” and seek judgment against members personally.
Attorneys at Nowlin Scott Law Firm are dedicated to supporting small business owners. We assist in the formation of Limited Liability Companies as well as other business entities to ensure it is done properly and common mistakes are not made.
Along with taking care of your filing from start to finish, Attorneys at Nowlin Scott Law Firm will draft foundational documents to establish the operating agreements of the member(s). Establishing a strong business foundation can help guide the members in the event of crisis.
Check out some of our other informative blog posts, here.