Hello again! For those of you in Western Washington, I hope you’ve been enjoying the glimpses of sunshine we’ve had the last couple weeks. Do any of you ski? I do…and I am excited about the snow reports I’m hearing today! Here’s hoping it sticks around…the 40 degrees and rainy thing just doesn’t cut it when you want to use those season passes.
ABCs of LLCs - An Introduction
Many of you have been asking for more information on LLCs. What are they? How do they work? What do *you* need to do if you have an LLC? Over the next few weeks we’ll cover all these topics. Today, though, we’ll start with a quick overview and some resources for LLC owners.
What is an LLC?
LLC stands for Limited Liability Company. It’s a business entity created at the state level (you can apply for yours at the Washington State Secretary of State website). The main purpose of an LLC is to limit liability that is created by your company to your company’s assets. Put another way, if someone sues your company, having an LLC allows you to say, “You can sue my company and reach company assets if you win, but you can’t take my personal assets, too.”
*There are several significant exceptions to the liability protection of an LLC. We’ll discuss those exceptions in depth at another time; for now, don’t make any assumptions about this, and be sure to talk to your lawyer about when your LLC does and does not protect you from personal liability.
What do you need to do to make your LLC “work” for you?
One requirement that you must fulfill in order to benefit from an LLC’s limitation on liability is to “observe the corporate formalities.” That’s lawyer-speak for dotting your i’s and crossing your t’s; run your LLC like a company, for Pete’s sake! Don’t mix company finances with your personal finances; don’t sign contracts in your own name, sign them on behalf of the LLC. Make sure that everyone you do business with knows that you’re an LLC - if they are on notice that they’re dealing with a limited liability company, it makes it harder for them to later argue that they should be able to sue you personally.
Some Resources for LLC Members
And LLC has “memebers” like a corporation has “shareholders.” In everyday usage, you’ll hear people talk about owning an LLC - that means they are a member (maybe the only member) of that LLC. Anyways, today’s post is a drive-by overview of some important stuff to keep in mind when you have an LLC. Here are some online resources for LLC owners/members:
IRS explanation of the Limited Liability Company
Secretary of State definitions of business structures
Doing Business in Washington Index
Leave Your Questions & Comments for Future Discussion
What would you like to know about LLCs? Do you have one and feel a little lost? Please leave your comments and questions here, and I’ll cover your questions in future blog posts. Stay tuned for my next post on when an LLC will NOT protect you from personal liability.
I found your blog on MSN Search. Nice writing. I will check back to read more.
Eric Hundin