You started your business on your kitchen table — and it’s succeeded beyond your wildest dreams. What started out as a side gig has become your full-time occupation.
Is it time to convert your sole proprietorship to a limited liability corporation (LLC)? It just might be a strategic move.
What’s the benefit of an LLC?
As long as you operate as a sole proprietor, you and your business are the same legal entity. That can be legally and financially dangerous if you end up being sued by a disgruntled customer or supplier. Every asset you own — including your home — could be at risk.
When you operate as an LLC — which can be done even if you retain sole control over your company and are its only employee — your business becomes its own legal entity. Its assets and your assets are two distinct things. This provides a layer of protection against lawsuits and other financial issues.
What does it take to form an LLC?
Generally, an LLC isn’t that difficult to create (although it’s generally wisest to work with a legal professional throughout the process). The basic steps include:
- Finding a unique business name that isn’t already registered in your state and doesn’t infringe on anyone else’s intellectual property rights
- Creating your articles of incorporation and filing them with the Virginia Secretary of State’s office
- Drafting an operating agreement that lays down the rules of ownership and describes how the business will be managed and how profits and losses will be divided
- Publishing the creation of your LLC, if so required in your jurisdiction
- Opening a new bank account that is solely for your business
- Obtaining any required business licenses or permits that are necessary to legally operate in the state, county and city
While it’s not a long list, these steps do require a lot of research — and mistakes can be costly. If you’d like to learn more about how our firm can help you with your business entity formation, please continue reviewing our website or contact us directly.
