posted byBagasian LawJuly 28, 2021
If you’re starting a small business, setting it up as a limited liability company, or LLC, is always a good idea.
Most business owners have heard that an LLC protects them from losing everything if someone should decide to sue, but is that all there is to it?
What exactly is an LLC and why is it considered by so many business owners? And finally, is it really necessary or useful? Below are some things that you need to know about LLCs and their pros and cons.
In this article, we will be discussing:
An LLC helps protect your business if someone sues you at some point.
When your business is an LLC, the plaintiffs cannot come after your personal assets to settle any business liabilities or debts that you may have.
LLCs can be formed with companies that have one or more people, which makes them different from corporations that have shareholders and numerous employees.
With a limited liability company, it’s easier to open bank accounts, apply for permits and licenses, enter into various contracts, and hire employees.
Even better, it is simple and inexpensive to form one of these companies, making them very beneficial for several reasons.
When you own a small business, an LLC is not a necessity, but its many advantages make it a smart choice nonetheless.
Many people wonder if a lawyer is a necessity when forming an LLC, and the simple answer is “no.”
Online services are now available that will help you complete the process for a nominal fee, but this doesn’t mean that hiring a lawyer isn’t a good idea.
An experienced lawyer helps make sure that nothing important is ever overlooked or forgotten, all LLC paperwork is completed and submitted properly, and any tax-related questions you’re liable to are answered.
Hiring a lawyer from the start will help you save a lot of hustle and time now, while saving you money in the future.
A limited liability company is advantageous over a sole proprietorship or a corporation because it:
While setting up an LLC is sometimes more expensive than other types of companies, many business owners still prefer this type of setup.
It is specially designed for smaller companies and allows for less worry about losing everything if something goes wrong and one of your customers decides to sue.
The first thing that you’ll want to do when setting up an LLC is decide on a name for your
business, and you’ll be able to enter the business name into a system to determine if it has
been taken.
Once you determine that the name you want is available, you can begin to set
up your LLC.
Before you check out the name for your business, you’ll need to decide which
state to set everything up in.
The next thing that you’ll need to do is choose a registered agent for your company.
This is
the person who will send and receive all paperwork on behalf of the company. If you are the
only employee of your company, this will naturally be you.
Next, you’ll have to file articles of
organization, which are then filed with your state and usually cost around $100 for the filing.
At this point, you’ll have to create what is known as an LLC operating agreement, but this is
something that not all states require.
When you do need an operating agreement, it usually
consists of sections such as Organization, Management and Voting, Capital Contributions,
Distributions, Membership Changes, and Dissolution details. Check with the state to see if
this step is necessary.
Finally, you’ll need to get an employer identification number, or EIN. The good news about
an EIN is that you can get one for free simply by going to the federal EIN website.
While all of
these steps can sound a bit complicated, they’ll happen faster and more cheaply than you
think.
In fact, it doesn’t usually take long at all to get a limited liability company all set up
and ready to go.
While they are usually not enough to dissuade someone from forming an LLC, you should be
aware that there are still a few disadvantages to this type of company.
They include the
following:
Nevertheless, most potential business owners consider the advantages to far outweigh the
disadvantages. If you’re trying to decide between an LLC and another type of company, you
can always consult with an attorney because the right lawyer will help you make the right
decision in the end.
If you’re curious about how much money you’ll spend to set up an LLC, the prices range from
$40 to $300 or more, depending on which state it is.
Each step of the process can cost you a
little more, but keep in mind that some states allow you to form an LLC for practically
nothing.
If a limited liability company is something that you’re interested in, make sure that
you check with your state and they’ll give you all of the information you need to proceed to
the next step.
You’re also likely to need your business license renewed every year, which usually costs $20
to $100 per year.
This is yet another benefit of hiring a lawyer to help you with your LLC
because a good lawyer will make sure that you are aware of everything you need to do to
keep your business paperwork up to date.
It may sound complicated, but it’s actually very
simple once you get used to what you have to do to keep your business current.
An LLC is one of the least complicated businesses to set up and can be perfect for
companies with just one or two employees.
The right lawyer can answer all of your
questions so that you can decide for yourself if an LLC is right for now, and it’s all a lot
simpler than you think.
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