What steps do I take when I want to form an LLC? Well, the first thing we need to talk about is, Why are we forming an LLC? Presumably, the purpose of doing this is to try and protect your personal assets from the business liability so that if your business gets sued that they can’t take any of your personal assets.
Now an LLC is different than a – it’s sort of a hybrid between a partnership agreement and a corporation and it does afford the parties limited liability; however, it is a little more complicated than a corporation since you don’t necessarily have officers and directors and they have particular duties.
In an LLC you have managing members or a managing member and that’s all designated under an operating agreement. The operating agreement designates what each party is supposed to do and also it shows who is the ownership interest in an LLC.
Now any number of people that I see come in and say, “Oh, I have an LLC,” and I say, “Well that’s just terrific, can I see your operating agreement?” and their eyes glaze over, roll in the back of their head and they don’t know what I’m talking about. So I say, “Well, who owns that?” “Well, I do,” or they tell me who it is. “Well, where is that,” because that’s what the operating agreement does. It lets you know who owns it. It’s sort of analogous to a corporation whenever you don’t issue any stock.
Well who owns it, you know, if you don’t have any shareholders, well, nobody owns it. So with an LLC it’s fairly complicated. For that reason I suggest that whenever you’re talking about setting up an LLC let’s talk about why you want to set it up and the advantages of an LLC versus a corporation.
So if you have a going concern a corporation is probably much easier to handle and to be in – affords you more liability protection than an LLC, particularly if you are a single member LLC. If you’re the only one interested there’s been several cases that says well, they can get your personal assets or go through the – get the LLC assets for your personal debts.
So before you jump into an LLC or go on-line and set it up I suggest that you might want to think about setting up an appointment and let’s talk about setting up an entity that will accomplish what you want because, if you simply set up a corporation, don’t issue any stocks, well, you may not have afforded yourself any protection from your creditors’ claims, and if the corporation gets sued then you may be personally liable for the assets. So if you have some questions about setting up an LLC or corporation, give me a call at (727) 847-2288.