When starting a business, one is often faced with many questions. Things such as the name, organization, and day-to-day operation are often the first things potential new business owners consider. Something often overlooked in those initial discussions is the type of business from a legal perspective to open.
Most people have heard of an LLC or have seen the letters accompanying a business name around town. But what do they mean? An LLC, known formally as Limited Liability Company, is a form of business entity that protects the owner/operator of the business in a multitude of ways.
First, and most importantly, is right there in the name itself. The limited liability an LLC can offer the owner. Essentially this type of business formation protects the owner’s personal assets outside of the business from most debts and lawsuits brought against the corporation. This protects things such as the owner’s home, separate bank accounts, and other assets from the liabilities the business might incur during operation.
Another large benefit is protecting the name you chose for the new business. In Michigan, the state office of Licensing and Regulatory Affairs, known commonly as LARA, is responsible for registering all LLC’s formed in the state. When an LLC is registered, they are the only business within the state of Michigan allowed to operate with that name. This allows the business owner, who has worked hard to establish a reputation in the community, to ensure someone else doesn’t use that reputation for their own advantage.
Additionally having an LLC can help with tax options for the owners. When an LLC is formed multiple different options for taxation are available to the business owner that are not typically available to someone operating as a sole proprietor. These options can reduce the tax consequence of the business and increase the profit of the business.
Like all things, there are some requirements to meet before these benefits can be realized by a new business. However, these requirements are relatively straight-forward and should not stand in the way of creating an LLC for a new business endeavor.
Perhaps the largest of these requirements is present at the onset of the business, the business must be registered with the state. In simple terms, there are certain registration and/or formation paperwork that must be filed with the State of Michigan in order to be offered the protection and benefits mentioned above. This formation of the LLC however is the largest step of “paperwork” needed for the life of the LLC. Once registered with the State of Michigan, however, the benefits listed above become available to the business owner.
Further, the operation of an LLC requires the business owner to submit yearly paperwork to the State of Michigan. Luckily though, this annual report is not a monumental undertaking. While it can seem daunting, the annual report is essential in keeping the protection of the LLC for the business. This ensures the State of Michigan realizes the business is still in operation and the name of the business is still exclusively the right of the business to use. Without this yearly reporting and continued registration of the name, the business loses the protection of what an LLC provides.
In summary an LLC is an essential step in beginning the adventure that is business ownership. Martin L. Rogalski, P.C. understands how daunting the paperwork of starting a business can be. Our attorneys and staff are ready to assist you in selecting the type of business entity right for you. We are here to help guide you through the paperwork and ensure you and your new business are protected.
