Legal Factors to Consider with LLCs
When you first start a new business venture, planning and developing the organizational structure of your business sets the groundwork for the rest of your operations. Many business owners are drawn to a limited liability company, or LLC, for its combination of management flexibility and protection for personal liability for the owners.
The LLC became especially popular in the mid-1990s following certain IRS new entity classification regulations, and it has now become the predominant form of new entity filings in the state of Oklahoma.
One of the main reasons many business owners choose to conduct business as an LLC is liability protection. Business owners are generally not personally liable for the debts of the business, decisions or actions taken by the business itself.
For example, if the LLC breaches a contract with a third party, the creditor may attempt to obtain a judgment against the company and seize the assets of the LLC. The personal assets of the owner, such as their personal residence or car, however, are outside the creditors’ reach.
This liability protection is not without its exceptions; therefore, it is important to always respect the separate corporate identity of the LLC. The attorneys at DLB are available to provide tips and strategies to help business owners avoid unknowingly canceling the liability protections offered by the LLC.
Another attractive feature of the LLC is its ability to elect how it is taxed, i.e. as a corporation, partnership, or sole proprietorship.
The management of the LLC should be detailed in an operating agreement. The purpose of the operating agreement is to set forth the ownership of the company, its management structure, the rights and obligations of the manager(s) and members of the LLC.
Even single-member LLCs should have an operating agreement as it is required by banks and other lending institutions. The attorneys at DLB can assist with preparing the business formation documents necessary to get your LLC off to the right start.
While starting a business is exciting, choosing the best entity structure for your business can be a bit overwhelming. The commercial department at DLB is happy to help you navigate the business formation process so that you can focus on what really matters: making your business a success.