Jennifer Reuting

Individuals are now, more than ever, realizing the power of the limited liability company (LLC). If you’re like many people, you probably understand that an LLC can benefit you somehow; you just don’t know the next steps to take.Read on to find out the benefits of LLCs, get help naming your LLC, and get the lowdown on the different tax types for LLCs so you can make the best decisions for your business.

An operating agreement is a contract that controls how an LLC (limited liability company) operates and how the members interact with the LLC. You might think that as a sole owner of a company that no operating agreement is necessary — after all, operating agreements are comprised of terms agreed to by all of the members, and well, why make an agreement with yourself?

If you’re planning on being the only member of your limited liability company (LLC), your LLC will be designated as a single-member LLC (SLLC). Several states’ courts have ruled that single-member LLCs don’t offer the dual-layer of liability protection, called charging order protection, that regular LLCs offer.

You can do nothing worse than hold investment property in your own name. Please read that statement again and again until it’s a mantra that keeps repeating in your head. So now that you know you need some kind of entity to protect your investment real estate, you can compare corporations to LLCs. Knowing when corporations can kill The limited liability company has an acute advantage over all other entities when it comes to holding real estate.

One of the primary concerns of starting a new venture is acquiring capital. This need for cash can be a game-changer when it comes to selecting an entity type for your new business. If you seriously intend to go after private equity (venture capital, institutional investors, and so on) or raise money through an initial public offering (IPO), then there’s a chance that you’ll want to form your business as a corporation rather than a limited liability company.

As the adage goes, “You aren’t in business until you’ve been sued.” As litigious as society is these days, you don’t even need to be one of the bad guys to be dragged into court. By simply transacting business with the general public, you open yourself up to myriad potential lawsuits, and no matter how arbitrary the complaint is, the destruction (and legal fees) it leaves in its wake can be crippling.

Tens of millions of Americans operate small businesses. They range from small, home-based side businesses to fully operational companies with many employees. For the most part, these individuals operate without protection. Granted, they may not take what they do too seriously. They may consider themselves independent contractors or consultants, but in today’s litigious society, operating without even a basic level of liability protection is a bad move.

If you elect partnership taxation for your limited liability company (LLC), you’re assessed a 15.3 percent self-employment tax in addition to the personal income taxes you’re required to pay on the profit that’s allocated to you. In addition, even if you’re an active member of your LLC, you aren’t allowed to hire yourself and use payroll taxes as a way to get around the hefty self-employment tax bill each year.