Are you considering starting a business and wondering what type of legal entity to form? As a business lawyer, we highly recommend considering a Limited Liability Company (LLC). LLC formation offers a range of advantages, some of which are uncommonly known or overlooked. In this post, we will explore the benefits of an LLC for businesses, provide examples of how LLC formation can reduce liability exposure and and discuss best practices for starting your LLC.
Why Choose an LLC for Your Small Business?
LLCs offer several key advantages for entrepreneurs looking to start a small business. One of the most significant is the protection LLCs offer personal assets. As the name suggests, an LLC provides a limit on the liability of its members. That means if you encounter legal trouble, such as a lawsuit, your personal assets like your home, car, or personal bank accounts, are not at risk.
Real-World Examples of LLC Benefits
Let’s take a look at some examples of successful LLC formations in different industries:
James and Sarah are starting a small business that requires extensive travel throughout the country. By forming an LLC, they are able to scale their business and have the protection they need to reduce their personal liability in the event of an accident or lawsuit while traveling to and from clients.
Maria runs a successful consulting business, however, she was personally exposed to some of the litigation that her company was subject to. To reduce her personal liability, she formed an LLC, which in turn protected her personal assets in any future legal proceedings.
Best Practices for Starting an LLC
If you are considering forming an LLC for your small business, it’s essential to follow some best practices:
- File Articles of Organization (or similar document): You will need to file documents with the state agency in your state to actually create the company. This legally forms your company and creates your LLC.
- Create an Operating Agreement: This document sets out the rules of the LLC, outlining each member’s responsibilities, how profits will be divided, and how the LLC will be managed.
- Register for Necessary State and Federal Tax ID Numbers: Always ensure that you meet all the necessary requirements for registering your LLC for tax purposes.
Get Personal Legal Guidance from Garibian Law Offices
Starting an LLC can be an effective way to reduce your personal liability while gaining tax advantages and flexible distribution of earnings. However, it is essential to do it properly, following the best practices discussed above.
At Garibian Law Offices, we pride ourselves in helping aspiring entrepreneurs like you with personalized legal guidance. If you are interested in LLC formation in Delaware or creating a Pennsylvania LLC, or New Jersey LLC for your small business, contact us today to learn more and to schedule an appointment.