LLCs and What You Need To Know

Congratulations! You have taken the steps so few people dare to take—the steps of owning your own business. The journey to this point has been full of ups and downs but you have persevered. You are ready to launch your business and see all your hard work pay off.

The entrepreneur spirit in you is willing to take on all the risks that come with owning your own business. But have you examined all the risks? Have you taken the steps necessary to minimize those risks so you don’t lose what you’ve gained? The only way to protect your business and your personal assets is to have a solid, legal entity in place.

What is an LLC?

The most common legal entity is an LLC which stands for Limited Liability Company. An LLC makes it possible for you, the business owner, and you, the individual, to be two separate beings. Many small business owners prefer LLCs because they are easier to manage and offer personal protection from business liabilities.

Here’s a Press Release where you can read more: Will Your LLC Legally Protect Your Personal Assets?

Why do I need one?

The primary benefit of an LLC is to protect your personal assets if financial issues arise or if you are suddenly faced with a lawsuit. It’s like building a fence around your home. A fence can deter people from breaking into your home or cars and provides peace of mind that your personal property is protected. Like a good fence, an LLC separates the business owner’s personal bank accounts, homes, or any assets you may own from risks the business may face.

How do I create an LLC?

The first thing you need to do is to register your business as a legal entity with your state.  And most business owners think once they have done this they are good, that they are protected. But that is not the case. Did you really think such an important business step would be that easy? Of course not! This is only the first step. It is vital that you maintain your LLC and produce proper documentation according to the rules of the state.

How Do I Prepare to Register an LLC?

Every LLC will need the following questions answered to get started:

• What date will you open?
• When do you plan to run your first payroll?
• Will you be selling goods or services?
• Will you be the member listed as the owner or do you have another entity to list as the member?
• What will be the name of the business?
• What will be the address where you will be operating?
• Who will be the registered agent?

With this information in hand, you will be ready to start the registration process for the LLC!  Registration will include reserving the name, applying for an EIN, preparing the Articles of Organization and then submitting this information with the state.  Remember, registration is only the FIRST step and not the ONLY step!  Now you need to focus on the maintenance required to prove you deserve liability protection.

How do I maintain my LLC?

Business owners who have heard the term “piercing the corporate veil” may have a false sense of security if they only register their LLC. Many business owners may not realize they need to maintain the LLC each year which includes renewing the license each year, not mixing business and personal funds, and documenting everything they do, from taking minutes at meetings to the transferring of money and the hiring of employees. Documenting includes putting in place an Operating Agreement that will provide further details about the structure and organization of your business.

Do I really need an operating agreement?

An operating agreement is a contract that states how an LLC will operate and how the members interact with the LLC. It seems rather silly to make an agreement with yourself, but this could be the most important step you take. Why? Because not having an operating agreement is like dying without a will. If you die without a will the state will decide who gets what. The same is true for your company. If your Operating Agreement is not specific to your company and disputes arise, state laws will determine how your company will be run and your voice will no longer matter.

What If You Need to Break Up?

With business partners, we call this a business divorce.  A partnership break-up can get as ugly and expensive as a divorce.  Too many times friends or family go into business together and then end up hating each other after paying lawyers to end their relationship.  An operating agreement can save you literally hundreds of thousands of dollars later on.  Each agreement needs to include:

• How will disagreements be handled? Everyone is happy and on the same page about the business when things are just beginning, but the stress of being an entrepreneur will no doubt change those relationships over time. Spelling out the rules over how disputes will be handled will save a lot of heartache, and money, down the road.
• It will secure your LLC status in the event of a lawsuit. The only way to show a court that the business was operating independently, and will, therefore, shield the owners from personal liability, is to have documentation such as an operating agreement.
• It will clarify expectations. The possibilities of what your agreement can include are endless. How will profits and loss be split? What if one of the partners wants out? How will business decisions be made?

Here’s a Press Release where you can read more: Will Your LLC Legally Protect Your Personal Assets?

It is always important to remember that you are in control of how you run your business, but you cannot control other people. The best way to ensure the success of your business, to avoid financial ruin and lawsuits, is to have an LLC and a specific operating agreement drafted by an experienced attorney who has your best interest in mind.  You didn’t start your business to see it fail and Dana Ball has made it easy and affordable to protect your business. Dana wants your entrepreneurial journey to be filled with more ups than downs.