Who should incorporate a limited liability company?

There are several ways to form a for profit business. Whether it's a sole proprietorship or a limited liability company, you need to know which is best for you.

Who should incorporate a limited liability company?

Anyone starting a business, or currently running a business as a sole proprietor, should consider forming an LLC. This is especially true if you are concerned about limiting your personal legal liability as much as possible.

If you have a small business, whether a sole proprietorship or a partnership, you should seriously consider forming an LLC.

It will allow you to obtain significant legal protection for your personal assets, without disrupting the management and income stream of your business.

The creation of an LLC has several advantages that may or may not be important to a business owner. But, regardless of any other factors, a business owner needs to form an LLC when the business starts making profits or taking risks.

Selecting a state in which to form your business is an important decision. If you are a licensed professional, such as a doctor, lawyer, accountant, architect or engineer, your state may not allow you to form an LLC.

The information provided on this site is not legal advice, does not constitute a lawyer referral service, and no attorney-client or confidential relationship is or will be formed by use of the site.

Some states may also require you to publish a notice, often in a local newspaper, confirming the formation of the LLC.

An LLC can be more expensive to form and operate compared to a sole proprietorship or partnership.

Therefore, it is generally considered a good idea to consult with a corporate attorney or accountant to make an informed decision about which type of business entity is best suited for your specific business.

Your state may require you to publish a legal notice in a local newspaper announcing your intention to form an LLC.

A business owner who wants maximum protection of personal assets, plans to seek substantial investment from outsiders, or anticipates becoming a publicly traded company and selling common stock, will probably be better off forming a C corporation and then making the S corporation tax election.

In almost all situations, you will want to form your LLC in your home state, but there are some rare exceptions to the rule.

In some states, persons engaged in certain types of professional practices cannot form regular LLCs.

In addition, LLCs can be owned by any other type of corporate entity, and an LLC faces substantially less regulation regarding the formation of subsidiaries.

If you like the ease of running a sole proprietorship or partnership, but need liability protection, you may want to consider forming a limited liability company.