Most stories about businesses, successful or otherwise, will almost always start as personal endeavors rather than corporations LLC or Limited Liability Corporation. It is impossible for even the most experienced, resourceful person to see the future and claim that; okay, such and such idea is going to rank as a successful business venture.
What is an LLC corporation? The usual norm is that a person starts working out of his garage or home. Overtime, as the business grows, the home grown business evolves into a separate legally recognized entity. That is a corporations LLC. You will also need to decide between corporation vs LLC.
Personal Business And LLC
Here are some quick benefits of operating your business as a corporations LLC, as against continuing to operate it as a person business.
- Shielding personal wealth from business loss or gain. Everybody begins their business hoping that it will be a huge success. Then again, factors ranging from change in economic conditions to competing products can doom certain businesses. If you are running the business as a personal business, then any loss by the company becomes your own loss as well. By ensuring that your business is a corporations LLC, you are protecting your personal financial wealth from such losses in business.
- Shielding your personal life from company related lawsuits. Running a business is not easy, especially so because there are any number of reasons for your business to experience an occasional lawsuit from an upset partner or an unhappy customer or even employees. By making sure that you operate out of a limited liability company; you are allowing such legal issues to only affect your business and not your personal life.
Transforming Your Business
It is clear that there is a lot to gain from having your business become an LLC, than just running it as a personal business. If you own a business that is currently run under your own personal name and wish to convert it into an LLC corporation, there are a few things that you should always remember.
A corporations LLC is like an entity, almost like a real person. This person may not be real but as far as the law is concerned; once you conceptualize an LLC and register a company as such, it becomes a real entity. This corporations LLC entity will have a name, it will have an address, communication phone number and such.
When converting your business, ensure that you pay special attention to the following topics.
- Moving all finances related to the business from your personal bank accounts to the corporations LLC dedicated bank accounts.
- Moving the property contract from a personal name to the name of corporations LLC.
Finances And Bank Accounts
When operating a business, it all comes down to money. You will have money going out and money coming in. Ideally, everything should go on in a smooth fashion without any issues. Then again, there can always be some disagreements when it comes to money. You could be paying an employee and there might be an issue with that, which gets raised as a lawsuit. Sometimes, you may end up defaulting on a payment.
This is why, once you form a corporations LLC, it is important to move all the money that was meant for the business into a separate bank account that is identified as the official account for the LLC. A lot of people start their corporations LLC, do all the legal stuff but continue to use their personal account for the corporations LLC. This can cause unexpected problems and enormous confusion.
Here is a simple example. Let us suppose that you have paid, a dated check to a supplier. Unfortunately for you, you encounter some huge financial expenses, and your personal bank account has insufficient funds. The supplier will use that check, and it will bounce which may result in a litigation. If you had kept your business transactions separate from your personal transactions by having a dedicated bank account, such events won’t happen.
Property Contracts
All business will need infrastructure in the form of a variety of assets, with the most important asset being office buildings. This means, you will have to lease the property to host your offices and make space for your employees. Usually, when a business starts, there is no LLC to begin with. That means, the property will be under your name. Once you carve out an LLC for your business, ensure that the property lease contract is transferred to the newly formed legal entity.
This is keeping in line with the fact that, everything and anything related to the business, has to keep with its own legal identity, which is the corporations LLC. Ensure that this is indeed the case by working with a company lawyer who knows how to help you, make the transition. You may also wish to have a corporations LLC lawyer working for you, in the event of any legal troubles as well.