Starting a business as a LLC

When starting a business, it’s important to choose the right structure like a Limited Liability Company (LLC).

A Limited Liability Company is the right structure for an individual or group of people who need to have separation from business liability and personal assets. A LLC is formed under state laws and has aspects of both a corporation and a partnership.

The Internal Revenue Services states on its IRS Web site “LLCs are popular because, similar to a corporation, owners have limited personal liability for the debts and actions of the LLC. Other features of LLCs are more like a partnership, providing management flexibility and the benefit of pass-through taxation.”

Check state regulations and state offices for forming LLCs since fees are charged different rates from one state to another. In California, LLCs are formed through the Secretary of State’s office.

Individuals in most states can form LLCs, but they have to file taxes as a sole proprietor.

LLCs and individual responsibility

The corporate veil may be thin, as the popular phrase states, and in cases of true neglect there may not be separation from personal assets and corporate responsibility.

A business where employees face personal injury risk or where damage could occur to a customer’s property are well-suited for a LLC.

Companies that may work best as a LLC include:

• Start-up home improvement or construction companies
• Window washing companies
• Roofing companies

Limited Liability Companies must carry proper amounts of insurance to guard the members against liens on their personal assets in case of accidents.

LLCs can also be formed for brief periods of time. Separate companies that join forces on a specific project may choose to form a LLC until the project is completed.

This can happen in industries as different as real estate or film production where several different companies, all incorporated separately, come together to form a Limited Liability Company until a project is completed.

An individual can form a LLC following guidelines for the state of residence. A small business attorney may be helpful – at least to read over paperwork. A service like Legal Zoom helps individuals or companies form LLCs properly which includes proper registration with a state. I chose to use a local attorney once instead of Legal Zoom to file a LLC in another state. The attorney was going to do it at almost no cost. Cheaper is not always better. Questions lingered for months on whether or not the LLC had ever been formed.

As with any business structure, write a mission statement and values statement for the business which states why the chosen structure is important and how it’s necessary for proper functioning of the business.

This provides a future blueprint for understanding how the LLC is useful and can provide a reference point if changes are made in the future.