New small business owners typically put a considerable amount of time and effort into starting and growing their businesses. Because they have so much invested, it’s critical that they take steps to protect themselves and their business. One option for doing this is to use the limited liability company (LLC) business structure for the company.
Establishing a company as an LLC has several benefits, including protection for the small business owner. The LLC is a dividing line between the company and the owner. This can help to protect the owner’s assets if the company is successfully sued.
Limited liability doesn’t always apply
Small business owners should still be careful about how they’re handling their business and personal finances. If they don’t separate the two areas, it may be found that they “pierced the corporate veil” and are personally liable for the company’s financial responsibilities, including payment for successful lawsuits that were lodged against the company.
If the business is run fraudulently, the LLC may not provide the protection it’s intended to provide. This could also put the owner’s personal assets at risk of being seized to satisfy a judgment.
The business structure is only one consideration that comes into the picture when starting a company. It’s critical that new small business owners ensure they have everything set up in a way that protects themselves and enables the company to operate legally. Working with someone who’s familiar with these matters can help to make this part of opening a business a little easier.
