What is a Limited Liability Company ? Established by state law, a Limited Liability Company, (commonly referred to as an “LLC”), is a form of business organization that is similar in form to a sole proprietorship or partnership,(simple to own and operate), but possesses a limited liability “shield” that protects its owner(s) from liability to the same extent that stockholders of a corporation are insulated from its debts and obligations When creating a new business, it is important to consider what type it should be and how to go about it all. Deciding upon a limited liability company versus a sole proprietorship depends on how much liability the owner is willing to take on his or her shoulders when problems arise. Insurance may not be enough when the person is the sole proprietor, and his or her own assets may be subject to lawsuit if someone files against him or her. An LLC provides protection to those that build this type of business through limiting the amount o liability that affects the owners. It is best to research these types of company formations thoroughly before committing to one or the other. The next step to understand before the company is created is what liability is and how it affects those that may be at risk for a lawsuit. Business contracts may lead to contract liability when certain transactions occur with other parties that may be through office leases, agreements for loans or employment, and vendors as well as other sources. When no special circumstances exist, only the individual or entity on the contract is held liable. This is observed when rent is not paid. If the contract specifies that rent must be paid on certain dates with particular amounts, unpaid totals are liable for payment. This is if there are no other guarantees or individual signing including stipulations. Many contracts cause confusion, and it is best to ensure a business lawyer is available for consultation and use for company creation and assistance. Liability with Litigation There are liability concerns through the acts of a person. Certain actions such as negligence in upkeep and maintenance of real estate owned by an LLC could lead to litigation where the owner is liable if the lack of repairs caused injury to a tenant. The contract does not matter in these instances because the property is owned by the LLC owner. It is the personal act of the creator of the LLC that caused the damage and this makes him or her liable. Other incidents could include the poor driving skills of someone performing job duties for the LLC which leads to injury. Even without the existence of a contractual agreement, the owner is still liable to the other driver r entity. This means that the individual acts that the LLC creator performs could be litigious depending on the circumstances of the situation. The creation of a limited liability corporation or company does not nullify liability in these events because of how the injury or property damage came about. Because a person’s own actions may lead to litigation, it is important to avoid situations that may lead to others being injured. This means insurance for driving, the skill to avoid collisions on the road, safety protocols in place on the jobsite and adherence to regulations that protect workers. When creating a limited liability company, the LLC ensures that only so much liability applies to the owner. While this is beneficial, he or she must still prevent dangers to workers. Premises, accidental and incidental liability may still apply depending on the situation. This means a greater care must be taken to remove hazards and prevent employees from dangers that may be on the property or while at work. Choosing a Limited Liability Company When determining which type of company to create, the factors that surround liability and whether the owner may be affected by litigation often assists him or her in deciding on choosing the limited liability option instead of a sole proprietorship. The various contracts needed, business transactions and practices as well as who may be affected by potential lawsuits or who may cause them all play into which type of company to start when initially filling out and filing documentation. In some instances, added insurance with a sole proprietorship may be the better route for the individual. However, many choose the limited liability selection for the protections to personal assets and separation of other kinds of liability that may affect the owner. No matter what type of business that is created, it is best to contact a lawyer to ensure all paperwork and transactions are completed correctly, within local and state regulations and that they are valid and legal. Starting a new business on the wrong foot is often a sure way to fail before the company becomes an entity with great revenues. Legal representation should be on hand for any manner of issues that may arise. ]]>