If you are thinking about starting a business, you will want to consider limited liability company formation, along with sole proprietorship and partnerships. You want to consider all of these business options because it will allow you to choose the best type of business for your business’s needs. This is important because not all business will work well as a limited liability company nor will some business work well as a partnership.
To help you decide which form of business is the right choice for your business needs you will want to first think about how many people will be involved with the business, this does not include employees. If only one person is going to be running the business, you can elect to form a sole proprietorship or an LLC. If two or more people are going to be involved in running the business, you have the options of selecting a partnership or an LLC.
Before you start LLC proceedings, you will need to determine if you will be forming a single member LLC or a multiple member LLC. The difference between the two forms of LLCs is that in a single member LLC only one person is going to be in charge, much like a sole proprietorship. The difference between a single member LLC and a sole proprietorship is the asset protection. With a limited liability company, your personal assets will be protected, much like a corporation. In a sole proprietorship, your personal assets can be seized to settle any business debts or liabilities that are incurred during the course of business. With a limited liability company, the only time that your personal assets can be put at risk is if you have signed a personal guarantee, such as opening a line of credit for your business.
The multiple members LLC will allow more than one person to be a business owner, much like a partnership. Like the single member LLC, the multiple members LLC protects the assets of the members of the LLC, where in a partnership the personal assets are at risk for the amount of capital that each owner invested in the company.