A limited liability company (LLC) is a type of business entity. When formed properly and managed correctly, this business type can offer some protection from liability. Many business owners prefer the LLC because it can protect their personal assets from being used to satisfy the debts of the business. An LLC is not, however, the only business entity type that exists. Los Angeles business owners should consult with a business formation lawyer to explore the different options. A Los Angeles business formation attorney can help you select the business entity that best meets your specific business goals. At Structure Law Group, LLP our experienced Los Angeles LLC lawyers help entrepreneurs form LLCs to protect their assets and run these businesses in ways that minimize the LLC owners’ personal liability.
What Are the Benefits of an LLC?
There are many benefits to forming an LLC. When one or more owners – also referred to as “members” – form an LLC, these members can protect their personal assets from being used to satisfy business debts. Only their initial investments are placed at risk. However, there are many legal formalities that must be observed to enjoy this protection. The LLC must be formed properly under state laws. Here in California, doing so means filing the required paperwork with the California Secretary of State’s office. The business must also observe certain formalities in the way it is run post-formation. This observation of formalities requirement means that LLC owners do not simply get automatic protection as soon as they have filed the LLC paperwork with the relevant state.
The IRS also discusses certain rules that affect how an LLC is treated for tax purposes. In some cases, an LLC can provide a tax benefit if its members use their business entity and tax elections appropriately. There are different options, so it is paramount to consult with your tax professional about your specific situation.
What Other Business Entities Can Be Used?
An LLC is not the only business entity that can provide legal protection. For example, limited partnerships can also provide benefits, and in many cases, a limited partner enjoys many of similar benefits as an LLC member. A limited partnership does, however, require at least one general partner who is liable for the partnership’s debts. Partnership structures can also provide more flexibility for short-term projects or limited ventures, such as a specific real estate investment. The experienced Los Angeles business formation lawyers at Structure Law Group can help you determine which business entity is best suited to your unique situation.
How Do I Maintain the Protection of an LLC?
Once an LLC is formed, it does not grant automatic or indefinite legal protection for all its members. Members must observe certain business formalities. One of the most common problems occurs when members co-mingle the LLC’s funds with their personal assets. LLCs must faithfully adhere to separate accounting (including separate bookkeeping, bank accounts, and other financial structures) to enjoy the protection of an LLC. If not, creditors can claim that the LLC has become an “alter ego” of the members themselves and ask the court for access to members’ personal assets to satisfy LLC debts.
There may be additional requirements imposed by your state. Our Los Angeles business formation attorneys can help you form and run an LLC that maintains protection for all members throughout its life.
Experienced Los Angeles LLC Attorneys for All-New Businesses
The experienced Los Angeles corporate lawyers at Structure Law Group, LLP help business owners access all legal protections that LLCs have to offer. You can call our business attorneys at (408) 441-7500 in Silicon Valley, (310) 818-7500 in Los Angeles, or (512) 881-7500 in Austin, Texas to schedule a consultation or contact us online.