Should Your Business become a Limited Liability Corp?

If you already own a business as a partnership or sole proprietorship it may be beneficial to become a limited liability corp.  Also know as a limited liability company.  Perhaps your company is growing and you want to protect your personal assets or you want to solidify how the business is being operated so there isn’t room for disagreements between you and your business partner. 

Before becoming a limited liability corp consider if it is the best move for your business.  It’s likely you chose to start your business as sole proprietorship for ease and convenience.  There is no paperwork to file; you simply get a business license and start running your company.  However, continuing to operate as such denies you some of the benefits of being a business owner of a limited liability corp. 

Operating as a partnership is the simplest business entity for more than one owner. A partnership is not a taxable entity.  Each partner files losses or profits on their personal tax returns.  A legal contract is not required.  From a business stance, if a contract is not created that can open a can of worms in the future if there are ever disagreements between the partners.  In both cases of a sole proprietorship and a partnership if your business were to be sued or file bankruptcy you could become personally liable for the debts.  Forming a limited liability corp can protect you and your assets if anything were ever to happen without an limited liability corp.

If you are concerned about the future relationship with your partner establishing a limited liability corp can put into place bylaws and an operating agreement. When you put limitations and rules into place it protects everyone.

Forming a limited liability corp, or limited liability company can also protect your personal assets.  If your business were to be sued after becoming an LLC, the business would be it’s own entity and be separate from your assets.  The same goes for protecting your business with a limited liability corp.  If you were to be personally sued your business would be safe from the lawsuit.  This also applies in the case of your business debts.  Creditors would not be able to come after you or any other members of the LLC for debts owed by the business.

There are a lot of advantages of becoming a limited liability company.  There is also more paperwork and requirements involved.  It’s a good idea to consult a company familiar with laws in your state.