According to at least one recent survey, small business confidence is higher than it’s been since December, 2004. With the business community anticipating tax and regulatory reform from the new Congress and Administration, many small businessmen and women are expressing renewed optimism about their prospects in the years to come. If you own your own business perhaps you’re cautiously optimistic as well. Still, before you rush out to take advantage of whatever new opportunities the future may present, it’s always wise to ensure that you’ve properly protected everything that you’ve already built.
If you own a sole proprietorship, or are in partnership with another person, that protection should be focused on limiting your liability to ensure that your personal assets are not at risk if the company is ever sued or otherwise threatened. The limited liability company – or LLC – could be your best option for providing yourself and your family with that important protection.
What Is the LLC?
A limited liability company is a hybrid business organization that combines some of the best features of the corporate entity with those of a sole proprietorship or partnership. When you use an LLC organizational structure for your business, you get to enjoy the limited liability benefits that are a key feature for corporations. In the case of the LLC, your liability will be limited to the assets you have invested in the company. When you properly maintain a separation between your personal and business assets, you can ensure that your personal wealth will never be at risk if the business is ever sued or falls victim to bankruptcy proceedings.
At the same time, you maintain the flexibility that you enjoy with your sole proprietorship. That enables you to maintain the same type of control over business operations as you would otherwise have with your solely owned business or partnership. On paper, owners are considered members rather than partners or shareholders, but that has little impact on how you operate the entity. In most respects, you can continue to manage the business just as you would without the LLC designation – though it is important to ensure that you avoid any comingling of personal and business assets to maintain that separation between personal and corporate interests.
How Can an LLC Protect You?
When your business is an LLC, you can enjoy substantial asset protections. When the business entity is created, it is responsible for its own debts and liabilities – if the LLC is set up properly and maintained in good standing. That means that any debts that the business incurs during its operations can typically only be recovered from the company. That provides your personal assets with the protection needed to ensure that business losses don’t impact your personal wealth.
That protection also extends in areas where the company might be sued. If the business is liable for some accident that occurs on its premises, and ends up being sued by the victim, your personal assets could not be targeted. Only those assets owned by the LLC could be subject to recovery demands. Of course, that protection would not extend to acts that you were personally involve in, such as a case in which you were directly involved in causing an injury in your workplace – either thought your actions or negligence. You’re also not protected from any fraudulent or reckless conduct that you might engage in.
As a rule, however, the LLC entity can serve as an important shield to safeguard your personal interests when you own and operate your own company. The key is to maintain separation between the personal and business aspects of your life and finances, and avoid co-signing for the company’s debt obligations wherever possible. Obviously, the act of co-signing for a business bank loan or other debt will override any liability protection you might otherwise have enjoyed should the company be unable to repay that obligation.
Can You Form an LLC in New York?
Yes, you can form an LLC in New York, and it’s a simple process to do so. In most respects, the New York LLC creation process resembles that used by many other states:
- You must select a name for your LLC. That name must include the words “Limited Liability Company” – or you can use one of two abbreviations: L.L.C. or LLC. It is also mandatory that the name be distinct and identifiable from all other business names currently filed with the State Division of Corporations.
- You also need to file Articles of Organization with the Division. This document needs to include the company’s name, county, and address.
- LLCs must also choose the New York Department of State to serve as their registered agent. That requirement can seem unfamiliar to those outside the state, where registered agent requirements are far less strict.
- New York also requires that you create and adopt an operating agreement within 90 days of your Articles of Organization filing with the state.
- You also have up to 120 days after filing to publish a formation notice in two newspapers, as directed by the county clerk. Those newspapers will then provide affidavits of publication which you must submit to the New York Department of State, along with your Certificate of Publication form.
Is There Help Available?
It’s clear that the LLC continues to be one of the most effective ways for business owners to shield themselves from liability related to their business activities. And whether you already own a business or are in the process of creating one, you need to have the peace of mind that comes from knowing that you enjoy that protection too. At the Law Offices of Mary A. Miller, P.C., our LLC experts can help you to establish a new LLC or convert an existing business into a limited liability company. Don’t leave your personal assets at risk to loss from threats to your business interests. To find out more about how we can help you with your limited liability company needs, estate planning, or elder law concerns, contact us online or give us a call at (914) 939-6565 today.