So you've decided to start your own business. Great! If you're like most entrepreneurs though, you're finding out quickly that there is a lot to consider after making this decision, especially when it comes to the law and how it will apply to your business.
When some entrepreneurs start their own business, the thought of separating themselves from the business doesn't cross their minds. Unfortunately, markets aren't always predictable, leaving a business susceptible to failure. If an entrepreneur hasn't separated themselves from their company, any debts that their business incurs could fall back on the owner, leaving them liable for payments.
To prevent this unfortunate outcome from occurring, our readers may want to consider changing the format of their business into a Limited Liability Company. There are a number of benefits to an LLC, including the fact that an LLC provides a barrier between an entrepreneur's assets and the assets of his or her company. With a properly structured LLC, creditors cannot go after the personal assets of owners in order to cover the debts of the company. There are costs associated with starting and maintaining an LLC that need to be considered but the value of the protection it provides ordinarily outweighs those costs.
On top of building legitimacy among consumers and other businesses, an LLC can also continue to exist even if the owner passes away or if the company changes owners.
If all of these outcomes would benefit your business, then forming an LLC may be the way to go. It's important to point out though that without the necessary legal knowledge, this task could prove difficult to achieve. In addition, there are alternative business structures that should be evaluated such as the "S" corporation at the time of business formation. That's why it may be necessary to seek the help of a skilled lawyer who can not only help you through the formation process but will make sure that you are in compliance with the law as well.
Source: Fox Business, "Five Reasons Why a Small Business Should Incorporate," E.J. Dealy, Jan. 31, 2013