If you are a born entrepreneur and have a wide range of interests, you may have several small businesses in operation at one time. Some of these may benefit from the protection afforded to limited liability companies (LLC).
Why form an LLC
According to the website of business lawyers Arenson Law Group, PC, an LLC is like a hybrid business entity that combines the limited liability of a corporation with the tax benefits of a single proprietorship. If you have a business that would have significant tax consequences if it is turned into a corporation, or you don’t want to be personally liable for everything from lawsuits to debts under a single proprietorship, then an LLC is just right for you. There is an advantage to an LLC, but there are also things to be careful about.
The potential for liability may prompt you to form an LLC from two or more of your businesses, but this is not always good practice. True, you save on time and money because you only have to go through the LLC formation process once. But that could be a bad decision for the following reasons:
- Your businesses may not be related, so would not be able justifiable to lump them all under one LLC
- You may want to eventually sell one business; it would be easier to establish the health and desirability of the business to potential buyers if you have separate accounts and books for each business
- You may need to take out a loan with your business as collateral. If not all your businesses are doing well, it will dilute the value of the businesses that are actually successful
Luckily, forming an LLC is a relatively simple and inexpensive matter, and it is even easier when it is handled by an experienced business lawyer. A lawyer will be able to help you determine if an LLC is the right choice for you. If it’s not, he or she could show you what your more feasible options may be.