I own a small family business. Because of what we sell, I have recently worried about being sued. A family friend suggested that I form an LLC. What are the advantages of an LLC?
A limited liability company, or LLC, is a unique type of business formation with many benefits.
An LLC consists of one or more members and exists as an entity distinct from its members. For example, an LLC can hold property in its own name and sue or be sued. Profits and losses are generally split between members in proportion with their contribution or share in the company.
An LLC can be formed relatively quickly and easily and is created by filing articles of organization with the secretary of state. A host of accompanying documents are also usually drafted including an operating agreement.
Although optional, the operating agreement can provide definition to items such as adding new members or dissolving the LLC. A good operating agreement can reduce disagreement between members and plan for future events.
Kansas law dealing with LLCs may supplement or even trump an operating agreement in certain instances.
Several basic features make an LLC a particularly attractive business structure. Foremost, as the name suggests, members are generally shielded from personal liability stemming from the operation of the LLC. This is a very important feature. If a product sold by an LLC causes an injury to someone, for example, the individual members are usually not personally liable for damages.
Members also retain a great deal of control over the business. Additionally, as another significant advantage, an LLC can be taxed as a partnership or a corporation.
Of course there are many other types of business structures including corporations, partnerships, close corporations, and Subchapter S corporations. Each business format has its advantages and disadvantages. Careful consideration should be given to the structure that is best for your business and an attorney can aid you in the process.
In sum, an LLC is indeed an appealing business format and it is wise that you are exploring the business structure that best fits your family business.