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| The Limited Liability Company (LLC)
Protect Your Personal Assets Imagine that an employee of the new business you own acts negligently and seriously damages customer property; the customer sues and wins. Imagine that the damage is not covered by your business insurance (for whatever reason). Can the customer require that YOUR personal home be sold to cover the damage caused by the employee? The answer to this question depends on (1) whether your business is established in a form of entity, such as a limited liability company, that protects the business owners' personal assets from the liabilities of the business and (2) whether you are treating that entity properly as a separate business. So, if your business is not established as a LLC or corporation, your personal assets are at risk. Why Choose An LLC? Management Structure Flexibility. An LLC can choose its management structure, rather than having its management structure imposed by law. For example, an LLC can choose a multi-layered management structure like a corporation, OR it can have a simpler, owner-managed structure akin to a partnership. More Choice in Method of Taxation. A multi-member LLC (Note: Owners of an LLC are called "members") can choose to be taxed as a partnership (the default) OR a C-corporation or a S-corporation. Corporations cannot choose to be taxed as a partnership. No Annual Meetings. Utah laws do not require that LLCs have formal annual meetings of the members. Corporations must have annual meetings. Why Not Choose an LLC? (Is a corporation the better choice?) Perceptions. Some financial institutions might not regard LLCs as favorably as corporations, believing that LLC owners may not be as serious about their business endeavors as corporation owners. You can always overcome any such initial bias with your actual (and presumably impressive) financial record. But, if first impressions with financial institutions are important to your business, you might consider a corporation. Venture Capitalists. If your business will be seeking funding in the future from a venture capitalist firm (a group of wealthy investors), you might consider a corporation. Some venture capitalists prefer to invest in corporations, but it is only one factor. In the end, the right business will get investment regardless of its form of entity. For more information about the entire range of our business law services, click here. |
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The material on this web site is for general information only and does not contain a full legal analysis of the matters presented. It should not be construed or relied upon as legal advice or legal opinion on any specific facts or circumstances. The viewing of this web site and the material contained herein does not create an attorney-client relationship with this Law Firm. Gregg K. Stepan is admitted to practice law in Utah and the District of Columbia. Christopher F. Lewis, Isaac D. Paxman, and Richard N. Barnes are admitted to practice law in Utah. |