An LLC provides a more formalized legal structure than a sole proprietorship that offers greater protection against owner liability in the event of litigation. An LLC is a structure that separates your personal assets from your company's debts. Probably the best-known international corporate structure is the international LLC or limited liability company. Through an international LLC, you literally limit your liability to the value of the company itself.
Companies that choose to be limited partnerships often have outside investors who are not involved in daily business operations. However, an LLC is a better option for many companies because it offers limited liability in addition to management by a select group. A type of business entity that is owned and operated by a person; there is no legal distinction between the owner and the company. Sole proprietorships are the most common form of legal structure for small businesses.
A hybrid between a corporation, a general partnership and a sole proprietorship. The owners of an LLC are called members. Members may include individuals, corporations, other LLCs, and foreign entities. Most states allow the creation of a single-owner LLC, called a “single-member LLC.” Do you want to know the other steps to start a business? See our blog post “11 Steps to Starting a Business in Tennessee or Alabama”.
You don't need to do anything to create one, and you'll report your company's income on your personal tax return. While an LLC may work well for passive income, you may be interested in establishing an ongoing business. One of the first decisions you'll need to make when starting a business is to determine the right legal structure for your company. Like a partnership agreement or corporate statutes, the LLC operating agreement sets out rules for the ownership and operation of the company.
If an LLC, or limited liability company, seems like the ideal vehicle for your side business, you may be wondering if you can form an LLC while you're employed in another job. For example, LLC owners should not use a personal checking account for business purposes and should always use the LLC's business name (instead of the owner's individual names) when working with clients. Imagining the future of your company and making detailed plans to achieve your goals will help you choose the right business entity for your new company. A sole proprietorship is best suited for a business owned by an individual or couple that has no employees or significant contracts with owners, vendors, suppliers, or subcontractors.
Starting an online business requires the same diligence as starting a physical business, plus some unique steps. Unless you're a sole proprietorship or a partnership, you'll need to submit documentation to the state to establish the business entity of your choice. Personal checking accounts should not be used for business purposes and the corporate name should always be used when interacting with customers. The limited partner shares in the company's profits, but his liability is limited to the amount invested in the company.
In addition, LLCs are a relatively new type of business, and there is less formal guidance and legal precedent available to LLCs than to corporations.