When is it beneficial to make a business an LLC?

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When is it beneficial to make a business an LLC?

This business will be run out of my farm. The milk house will be my work shop and I am building a 16′ X 16′ showroom/office in the machine shed. This will be a part-time business for now.

Asked on June 27, 2011 under Business Law, Wisconsin

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

The first and main advantage of an LLC is that, as there term implies--"limited liability company"--an LLC will help to limit your personal liability from the business. For example: the business borrows money and defaults (and you did not personally guaranty it); someone is injured by a product you make; you breach a contract; etc.--if the business is an LLC, you would not be personally liable for its debts and obligations, so the most you could lose is what you invested or have in the business, but not your personal assets (like your home or farm). The protection is not absolute--if you personally guaranty something, or personally committed a tort (e.g. ran into someone while driving on business), you could be liable, and certain tax and wage and hour obligations can affect an owner personally--but it still greatly limits  your liability.

Second, it is easier to legitimately take certain expenses as business expeneses with an LLC than if you are a sole proprietorship or d/b/a.

Third, many people feel it looks more professional and will help you with marketing.


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