Should You Rely On An LLC Formation Service?
For starting entrepreneurs, choosing the right and most efficacious business structure for their particular industry and specificities can undoubtedly be quite challenging- as can actually following up with all of the legal prerequisites that are required during the filing process.
While there are a plethora of different business entity structures to choose from (including Limited Liability Companies (LLCs), Sole Proprietorships, General Partnerships, and Corporations), most large-scale, successful businesses tend to either adopt an LLC or a Corporation structure.
This is because such structures provide numerous financial and managerial benefits that relate to a business's day-to-day operations, and consequently are deemed to be ''worth'' the extra rigmarole that indubitably pervades their formation process.
Having said that, the proliferation of LLC formation services in recent years has meant that starting entrepreneurs are becoming increasingly able to benefit from the advantages of an LLC structure without having to spend a significant amount of time maneuvering through the prolific red-tape that is involved.
Such services handle entrepreneurs' entire business formation process at a very affordable rate, which means they also provide a sweet alternative to the more ''conventional'' approach where business owners would have to rely on expensive attorneys from reputable law firms.
Below we will discuss the plethora of benefits that are associated with the aforementioned LLC business entity structure, and determine whether relying on an LLC formation service is the right choice for business owners in 2021.
What is an LLC?
The ''limited liability'' in a Limited Liability Company is indicative of one of the biggest benefits of this business structure, which essentially differentiates owners' personal and professional liability and consequently protects them under a so-called 'corporate veil'.
This means that, under the law, business owners of an LLC are separate financial entities to the company, and so any business debts accrued in the future (or any significant loans borrowed) will not jeopardize their personal assets.
Of course, this is not always the case. It should be duly noted that the owners of a corporation will still remain personally liable if: a) they personally guaranteed a specific business loan to a creditor in the past, or b) their negligent actions gave rise to significant, unforeseen damages.
Is Limited Liability Maintained Indefinitely?
As briefly touched on above, several business entities offer their members limited personal liability under the law; even though an LLC is one of the most popular and desirable options, there are still a few factors that you should duly consider before making a final decision.
Firstly, an LLC company must be ''adequately maintained'' in order for members' personal liability to subsist under the U.S legal system. This means that if a business is an LLC in ''name only'', but in pragmatic reality it is run and managed in an identical way to a sole proprietorship, the courts will consider it a ''sham'' and treat it in a similar way to a sole proprietorship- where limited liability is not offered.
Secondly, LLC business owners can still be responsible for capital that exceeds their initial investment if they have previously co-signed a debt agreement (such as a credit card application). This is important, as most lenders and financiers will commonly require both of the owners' personal guarantees, which they can then use as a ''safety blanket'' if the company goes bankrupt in the future and is unable to pay its loans.
Can Anyone Form An LLC Business?
Unsurprisingly, depending on the type of products and services that your business offers, you may not be eligible to form an LLC, regardless of whether you utilize industry-leading LLC formation services.
This is because the U.S judicial system has imposed ethical barriers on limited liability, which stem from the belief that some professionals- such as doctors, lawyers, and architects, should be subject to personal liability under the law as the nature of their work means that any negligence or lack of care in their day-to-day activities could give rise to catastrophic results.
This means that if you are currently interested in starting an LLC business, you will first have to ensure that your industry or profession does not preclude you from doing so.
Overall, an LLC business structure can provide a plethora of benefits for its members; limited liability, tax benefits, and increased ''prestige'' has meant that it has become one of the most popular choices for successful, long-term businesses.
We hope you enjoyed reading.