×

What Is a Limited Liability Company?

The word business basically refers to a group of people or any entity organized for profit, commercial, military, or agricultural activities. Businesses may be either for-profit or non-for-profit entities. Business enterprises range from small mom and pop operations to multinational conglomerates. The scope of a business is extensive as well as diverse. Some of the more common types of businesses are retailing, banking, insurance, gas/oil brokerage, manufacturing, financial, entertainment, pharmaceutical, health care, communications, transportation, and intellectual property.

Every business needs a business plan for investment. Business planning involves identifying and determining what specific and future profits, losses, revenues, and expenditures are likely to be. In order to prepare a proper business plan, small business administration experts can help you analyze current industry trends and see how your proposed small business could react to them. This can give you an idea of whether you need to revamp your product line, invest in new technologies, or make strategic alliances. They can also help you secure funding from banks and other lenders in order to start or expand your business.

Most businesses large and small seek some type of intellectual property protection. Protection can prevent another company or individual from using or selling an idea, product, or technology you worked so hard to get public. Additionally, by securing your businesses’ exclusive rights to a particular product line, you can limit how much others can make by trying to use the same name, concept, or technology. Obtaining legal assistance for your businesses-term business plans and studies will help you achieve the protection you need.

Many people starting out on their own usually prefer to form a limited liability company (LLC). Forming an LLC gives you many options to control your company such as what types of assets you can keep, when you can sell the company, and who can have access to its money. However, forming an LLC does come with some drawbacks. First, an LLC is a very complex legal entity and may not be worth the financial risk it represents. Also, unlike corporations, there is no way to make up a default judgment in a personal bankruptcy case.

Many businesses that start out as either corporations or sole proprietorships lack a profitable source of income. One common challenge these new businesses face is deciding whether they should form a partnership or an independent entity. Partnerships are often seen as being more stable because unlike corporations, there is more security of personal assets held within the partnership. However, a partnership’s viability often hinges on one partner’s ability to market the company. If the partner fails to market the business, the enterprise may quickly lose the investment and fail altogether. An independent corporation is a less risky investment, but there are still risks inherent in any type of business structure.

Both the partnership and the LLC share similarities and differences, such as how they are treated by the IRS and their respective tax status at the state level. Both also have pros and cons, and both require careful consideration before making a final decision on whether to form an LLC or a corporation. Forming an LLC requires much less paperwork than forming a sole proprietorship, and there are few eligibility requirements. An LLC might allow for a shorter tax time span than a sole proprietorship, which also means a lower tax bill. An LLC also has much less liability than a corporation, so lawsuits are typically less likely to be filed against the business.