Many small business owners determine that it is in their best interests to start an LLC, or a Limited Liability Company. These companies may consist of just a single person who was previously doing business under their own name, or they may have employees.
If you’re considering this, your biggest question is likely simple: Why set it up? Why choose an LLC and take the time to create it, rather than just doing business as yourself? What is the main benefit?
You are not liable in the event of a lawsuit
An LLC limits your personal liability. This means that no one can come after you on a personal level for the assets that you own over your business debts.
Say your company gets sued by a customer. They can level a lawsuit against the business, and, if they win that suit, you will have to pay them out of the business’s assets. But what if the total that you’re ordered to pay is more than the business owns?
If you were just running the company as an individual, there’s no dividing line between you and the business. Creditors may be able to take personal assets, such as your car or your house. If there is an LLC, they can take all of the assets owned by the company, but you always know that your personal assets are safe. Even if the company goes entirely out of business, you do not have to sell what you and your family own to pay off those debts. They belong to the company, not to you.
If this is something that sounds helpful, be sure you know how to officially set up your LLC. Working with an experienced advocate can help you avoid serious mistakes in the process.