Entrepreneurism has been a hallmark of the American economic landscape since the country’s founding. Starting a business has never been easier, but there are several legal questions to consider.
Many independent business owners decide to form unincorporated entities such as partnerships or sole proprietorships.
However, it’s a good idea to think about a limited liability company, or LLC. This route allows a great deal of advantages and benefits that are enjoyed by larger corporations, while remaining independent of stockholders.
A limited liability company protects the owner from individual liability if certain procedures are followed. This means that if a lawsuit is brought against the company, creditors can only go after the assets of the actual company. Personal holdings and assets of the company owners and officers cannot be touched so long as the corporate shield is intact.
Starting an LLC begins with filing Articles of Organization with the Secretary of State. In many states there is also a filing fee associated with this action. Articles of Organization include the name and address of the LLC and the registered agent.
In addition to the Articles of Organization, an Operating Agreement should be drafted that governs and dictates the operation and management systems for the company. The Operating Agreement may also contain procedures for departing company members, retirement, disability, death and the valuation of the LLC in the event of a third party sale.
In the case of taxation, check with your tax advisor. In some instances the income of the LLC passes through to its members, who then report the income they receive on their personal tax forms.
An LLC is a viable and attractive way to form a company, however, be sure to check your state’s regulations before you make a final choice. It is recommended that you hire a lawyer to help you properly draw up and file the necessary documents with the State Department of Assessments and Taxation.