As an independent contractor should I set up an LLC to best protect my assets?
Get Legal Help Today
Compare Quotes From Top Companies and Save
Secured with SHA-256 Encryption
As an independent contractor should I set up an LLC to best protect my assets?
I recently became in independent contractor for a company doing phone sales from my home. I’m wondering if I should make my business an LLC and what benefits that will give me? I want to protect my personal assets and keep the business separate.
Asked on August 3, 2010 under Business Law, Arizona
Answers:
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 13 years ago | Contributor
You should definitely set up either a limited liability company or a corporation. If you don't establishh one, then legally, you and the business are one. That means that if you incur liability as a business--such as for breaching a contract; or even for an accident you caused--you are personally responsible for it. That means that business liability could wipe you out personally. Either an LLC or a corporation, however, is a separate legal entity that acts as a liablity "firewall"--you will not be personally resonsible for the debts or obligations of your business. The protection is invaluable (though maintaining adequate insurance anyway is also a good idea).
As for which is better--generally speaking, an LLC is a bit simpler and more flexible for a small business, and involves less paperwork. A corporation can be better if you anticipate selling the business--you can simply sell the shares in a very straightforward manner. Either one can give you the same "pass through" tax status, so there's no double or corporate taxation. (For a corporation, you'd elect subchapter-S status.) A business attorney can advise you of the pros and cons of each and help you set it up.
IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although AttorneyPages.com has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.