In this week’s edition of the Small Business Series we are discussing the advantaged of forming a Limited Liability Company (LLC). There are several advantages to forming an LLC under the Laws of Oklahoma, including but not limited to:
Lawsuit Protection & Limited Liability
When you form an LLC you create a separate legal person. This means that if the LLC is sued, there are provisions in the law that protect you, the owner, from being held personally liable. One of the major benefits to an LLC, when compared to a limited partnership, is that with an LLC your personal assets are protected. While with a limited partnership your personal assets can be attached to a settle a debt. It is important that you conduct your business in a manner that complies with the law or else your liability shield may be dissolved. For example, you would need to pay company expenses out of company funds and personal expenses from personal funds. Otherwise, you may be held personally responsible for company actions.
There are some tax deductions available to an LLC than to other businesses, such as limited partnership and sole proprietorships. These deductions include medical expenses, pension plans, business trips and entertainment. If you are interested in avoiding audits, LLCs are one of the lowest groups, percentage wise, to be audited. Self-employed persons are among the highest groups audited.
This sections refers back to lawsuit protection. A lawsuit is typically either business or personal. If your LLC is sued there are provisions in law so that your personal assets cannot be attached. And vice-versa. If you are sued personally there are provisions in the law that protect your company assets from being attached.
Owning an asset in your own name provides an easy target when someone does an asset search on you. However, when you own an asset in your companies name it becomes more difficult to connect that asset to you personally. When someone, who is contemplating pursing legal action against you, does an asset search and finds that you do not have any personal assets, this may be decrease the chances of that person pursuing legal action against you. Thus, placing assets in your companies name, instead of your own, can provide a cloak of privacy.
With an LLC you have a broad range of powers when conducting day-to-day operations. According to Title 18 § 2003
, with an LLC you have to power to hold, purchase and convey real and personal property. You can also mortgage or lease such real and personal property. An LLC has the power to make contracts, borrow and raise capital, and sue or be sued in any court of law or equity. An LLC also has the power to make an operating agreement in any manner it chooses as long as it is consistent with the constitution and laws of the United States and state(s) of incorporation.