Jennifer Reuting

Individuals are now, more than ever, realizing the power of the limited liability company (LLC). If you’re like many people, you probably understand that an LLC can benefit you somehow; you just don’t know the next steps to take.Read on to find out the benefits of LLCs, get help naming your LLC, and get the lowdown on the different tax types for LLCs so you can make the best decisions for your business.

An operating agreement is a contract that controls how an LLC (limited liability company) operates and how the members interact with the LLC. You might think that as a sole owner of a company that no operating agreement is necessary — after all, operating agreements are comprised of terms agreed to by all of the members, and well, why make an agreement with yourself?

Tens of millions of Americans operate small businesses. They range from small, home-based side businesses to fully operational companies with many employees. For the most part, these individuals operate without protection. Granted, they may not take what they do too seriously. They may consider themselves independent contractors or consultants, but in today’s litigious society, operating without even a basic level of liability protection is a bad move.

A sole proprietorship automatically exists whenever you engage in business by and for yourself, without partners and without the protection of an LLC, corporation, or limited partnership. Although it sounds fancy and complicated, forming a sole proprietorship is about as easy as it gets. Forming a sole proprietorship When you begin transacting business, be it selling crafts at the local art fair or doing web design work in your spare time, you become a sole proprietor.

If you’ve ever heard of a family limited partnership, then you may think that you have an idea of what a family limited liability company is all about. Ironically, there is no such legal entity as a family limited partnership or a family LLC. If you were to call up your secretary of state and ask how to go about forming one, you’d hear a long pause at the end of the line.

Business liability insurance is a good way to help protect yourself. These insurance policies add an extra layer of protection . . . the key word being extra. Most insurance policies have disclaimers a mile long and aren’t too keen about paying out in a timely manner. Also, having insurance tends to encourage lawsuits rather than deter them.

A single-member LLC isn’t actually a different type of LLC. It’s just a normal, regular LLC with one exception: there is only one member. Because LLCs were originally intended to be partnerships, a single-member LLC is still subject to some slightly different rules. Unlike an LLC with multiple members, a single member LLC is not allowed to elect the partnership form of taxation with the IRS.

The low-profit limited liability company (L3C for short), the newest form of LLC, is a hybrid entity that sets out to bridge the gap between the for-profit and nonprofit business structures. L3Cs are a product of the social-consciousness movement and are still for-profit businesses, with the exception that profit motives take a backseat to the primary objective of public and social benefit.