How Does an LLC Protect a Small Business from Liability?
If you are a small business owner, you probably have far more responsibility on your shoulders then you ever anticipated when you first started out. While you’re busy worrying about everything from profitability to customer service, it’s important that you don’t forget about the various risks that you have assumed. In addition to owing money to lenders, paying your bills and fulfilling your service or product orders, you also are vulnerable to claims for damages. These claims could be filed by customers accusing you of negligence or failure to deliver what you promised, by employees injured on the job, even by colleagues or suppliers. No matter who is filing a claim against you, without the proper protection you run the real risk of losing everything that your business owns, as well as everything that you personally own. The best way to protect yourself from small business liability is by setting up your business as a limited liability corporation, or LLC.
An LLC provides many of the same protections against liability that are offered to more structured legal entities like C corporations and S corporations, but without the formalities required by those organizational types. The LLC is considered its own entity, separate from its owner or owners. When a small business owner establishes their business as an LLC, they ensure that they have no personal liability for debts, breaches of contract or personal injuries to third parties caused by the business or its employees or agents. Owners no longer have to worry about being sued and losing their family home or personal savings, though they still get the benefits of having their profits taxed as a pass-through, as well as the advantage of not having to adhere to the reporting or meeting requirements that other types of corporations must adhere to.
Limited liability corporations offer several other important advantages over other corporate structures. There can be multiple owners and have much greater freedom in how they manage their company, as well as in how they distribute their profits.
If you are a sole proprietor who is concerned about your level of risk, or if you are considering starting a business, speaking with an attorney experienced in establishing business entities may be one of the smartest moves you can make. Contact our office today to set up a time for us to sit down and talk.