If you own a business, you should register it. Even if your business is in its infancy, a part time business, or very small, it is always a good idea to register that business. Here, we’ve included the basics of an LLC and why this designation is perfect for those with small scale businesses.
What is an LLC?
An LLC, or Limited Liability Company, allows the business to “pass through” all company earnings to the individual who owns the business. If, for example, you were a plumber, an LLC allows you to claim your business’ earnings on your personal taxes keeping you from you from paying both business taxes and personal income taxes. Second, if, in the course of your day, you severely damaged some body’s home resulting in a lawsuit from the homeowner, if your company were registered as an LLC, your family’s assets are protected from the actions of your business.
Can Every Business form an LLC?
No. banks and insurance agencies are often banned from forming an LLC. Additionally, in California, many professionals such as architects and doctors aren’t permitted to operate as an LLC. Aside from the few exceptions, most businesses can form an LLC.
Do I need an Operating Agreement?
In most states, you are not required to have an operating agreement to form an LLC but there is another consideration involved. Just because your business is an LLC, that doesn’t mean that you are shielded from any legal liability that comes with the designation. By having an operating agreement and other formal business agreements, it is much easier to prove to the court, should a litigation arise, that you are operating as a separate business. If the court doesn’t believe that you are operating your business separately from your home finances, they could rule that your LLC protection isn’t valid.
I have a Business Partner. Can We still Form an LLC?
Yes but you will need an operating agreement that defines the share of the company that each of you will recieve. All of the same protections exist for limited liability partnerships and taxes are paid by each person based on their share of the company.
Can I Convery my Existing Business to an LLC?
Yes. With the help of an online business registration service, it’s easy to gain the protection of a limited liability corporation. States have differing requirements regarding the formation of an LLC so it is advisable to get help. Business registration services cost very little and assure that you don’t spend a lot of your valuable time trying to figure out the procedure.