You are running a small business without having formed a corporation or other business entity. Someone has suggested that you operate your business in the form of a limited liability company (“LLC”). Should you follow their advice?
In most instances, the answer is “yes”. The purpose of an LLC is to limit the liability of the owner if the business gets sued.
In a sense, the LLC stands between you and those who might want to file a lawsuit. So, the party filing a lawsuit might be able to get to the assets of the company but not to your individual assets.
How do you set up a proper LLC?
The paperwork necessary to form an LLC is not very complicated. File a Certificate of Formation with the Mississippi Secretary of State, adopt an Operating Agreement, obtain a tax ID number, and you are off and running. (read more here about Operating Agreements)
Even so, I recommend that you hire an lawyer to assist you. You want to be sure that the paperwork is correct, of course, but you also want it to be tailored to meet your specific needs.
No all businesses are alike, of course. The nature of a business, or the ownership structure, often requires more that just a standard Operating Agreement that can be found on the internet.
Operating the LLC.
Next, you should follow “corporate formalities.” This includes:
● Holding an annual meeting of the owner or owners.
● Keeping minutes.
● Adopting resolutions when proper.
● Filing annual reports with the Secretary of State.
● Holding your business out as a limited liability company and not a sole proprietorship.
If you believe that the formation of a limited liability company is the right move for your business, can the Panter Law Firm at 601-607-3156, and we will walk you through the process.