What Small Businesses Must Know About Getting an LLC

A business is more than a goal-oriented organization working together. It requires compartmentalization. It integrates many different elements to synchronously align for well-regulated operations. Entrepreneurs build this systematic scheme from scratch and, realize the significance of security quite well, for the security of assets as well the company.

These essential requirements are a necessity especially for small trades and businesses. Such proprietorships require a business instrument to create security for the entire business and the personal possessions or assets. A Limited Liability Company serves as one. The idea of Limited Liability Companies is becoming increasingly accepted and implemented amongst entrepreneurs and small businesses especially.

So, what exactly is this LLC?

A Limited Liability Company is basically a business entity on its own. This business incorporation provides flexibility and simplicity into business models which can be incredibly useful. LLC Businesses enjoy a structure that includes pass through taxation of a corporation with a limited liability of the corporation. This is undoubtedly a win-win situation for proprietorships and small businesses.

Forming a Limited Liability Company for your business means you would successfully transition your business into an independent entity of its own that has its individual legal and debt affairs. Limited Liability Companies can be a safety net for entrepreneurs who want to ensure that their personal possessions are safe and secure in case that their business takes a turn for the worse or fails. There can be one or many LLC members, depending on your business, of course. These members may be partners, investors or simply members of the company that will not be held legally accountable if the company faces unfulfilled obligations on its part or debts greater than the original investment.

Limited Liability Management

Other than small businesses, varying types of businesses reap benefits from the limited liability company including corporations. However, one must know that the business or company that wants to offer full liability protection should be appropriately maintained. The courts usually dismiss companies that are companies merely by name without the proper operational maintenance to back it up. Also, say if the owner of the limited liability company signs a debt agreement, they can be held responsible for amounts that are exceeding their investment. This is because, in its essence, this signature has given the lenders a personal guarantee of repayment of the debt. Therefore, if the business does turn out to be defaulted somehow, they have the capacity to go after the owner’s personal assets. An entrepreneur’s worst nightmare!

Lawyering up

If you are a Limited Liability Company that’s going into business with another company, then it’s imperative for you to have a written agreement where both parties acknowledge and answer all your concerns about the issue. These may be questions like:

  • What the deal between the members is?
  • How profits are to be distributed?
  • Who is going to look over the management of the limited liability company?
  • What the process will be for the members to come in and out?
  • The process following a member’s will to sell his individual stake.

All such concerns can be protected by hiring an attorney who will represent the Limited Liability Company. One that will not be biased for any particular member of the LLC. One that cannot promote or protect your interests, if they are against your member’s interests. Lawyers can play a pivotal role in negotiating the deal seamlessly.

Sources

https://www.incfile.com/limited-liability-company/

https://www.myusacorporation.com/articles/what-is-limited-liability-and-why-it-is-important

http://www.johnsonmarlowe.com/the-importance-of-the-llc-operating-agreement