Save Your Life Savings with an LLC
Whether you are just starting a new venture or are building your existing business, being an entrepreneur is an exciting endeavor! As a business owner, you have the ability to build a lot of personal and financial freedom into your life. However, if you are like many business owners, you have also invested a significant portion of your savings into their business venture, and it’s important to protect that investment. Working for yourself has many benefits, but it can also be risky. Regardless of the type of business you own, you may face liability issues in the future that could cause you financial harm.
Owning a business is all about managing the risk so that you can maximize your profits. With help from the Enterprise Esquire, you can reduce risks from the start when you form your business. Creating a Limited Liability Corporation (LLC) can protect you and your personal finances if someone gets hurt on your business property or if you face other legal liabilities. Illinois law requires business owners to follow certain steps when forming their LLCs. This formation process must be adhered to for the LLC to be valid, and the process can be complex.
What Is an LLC?
The first step to starting your business is deciding what type of business you want. This doesn’t just mean what products or services you’ll offer to customers, but also includes the legal structure of your business. Chicago business owners have a number of business formation options, each of which offers distinct advantages. Forming your business as an LLC allows for a lot of flexibility and provides numerous legal protections. An LLC is a type of business structure that is especially beneficial to small business owners because this it protects the business owner from being held personally liable for the business’s debts or legal obligations.
No business owner wants to believe that their company may be sued. You may already be thinking that getting sued isn’t an issue you’ll face. However, as your business grows with more employees and more customers, you may run into unanticipated liability issues. Businesses may be responsible for injuries that occur on their property, even accidents. This means that even the most careful business owner may face litigation if someone gets hurt on their property. Beyond personal injury liability, owners may face litigation related to employment, contractual obligations, vendor payments, confidentiality issues, trade agreements, and other business owners.
Between legal costs and lost productivity, getting sued can be hugely expensive. Businesses that lose in court may have to pay large judgments, which are often not completely covered by insurance. If litigation occurs, an LLC can insulate the business owner from having to pay an award out of their own pocket. The structure of an LLC legally separates the business from the person who owns it; they’re considered two separate, unrelated entities. If you are starting a business or own rental property, consider forming an LLC. Separating your personal finances from your company through an LLC is a great way to protect yourself. If you already own business, you can even convert your business structure to an LLC with the help of an experienced Chicago business attorney.
How Can Forming an LLC Protect My Finances?
Without an LLC, you may be personally liable for any damages your company has to pay a court award in a lawsuit. This means your life savings could be on the line. Many business owners protect themselves by having liability insurance. In fact, some business owners, such as rental property owners, are required to some form of insurance that could pay for a victim’s injuries if someone gets hurt on the property. Having a liability insurance policy is a good first step to protecting your finances; think of forming an LLC as another type of insurance. When you have an LLC, all business assets will be in the corporation’s name rather than in yours. This means that your personal finances and the business finances are completely separate. So, if someone sues your company and wins a court award against you, the only available assets that could pay for that award are those that belong to the company.
Let’s look at example: A Chicago rental property owner, Alice, is operating as a sole proprietor. One day, her tenant, Bert, breaks his neck on a broken staircase that Alice didn’t fix. So, Bert sues Alice, and wins a court award for $500,000 for his medical bills, lost wages, and pain and suffering. Unfortunately, Alice’s liability insurance policy only covers up to $250,000. This means that Alice is personally liable for the remaining $250,000, and will have to pay from her own savings.
is worst-case scenario could have been avoided. If Alice had formed an LLC and transferred the rental property to the corporation, rather than keep it in her own name, she wouldn’t have been personally liable for the $250,000 that her insurance didn’t cover. Therefore, Bert would only have been able to seek that remaining $250,000 from the LLC’s assets. While Alice’s company might have to sell the property to pay Bert, Alice’s personal savings wouldn’t be in jeopardy even if selling the property didn’t cover the outstanding $250,000.
Keep Your Savings, Form an LLC Now
When it comes to mitigating your business’s legal risk, it’s always better to be safe than sorry. Whether you are thinking about forming a new business or already own one, consider forming an LLC. Call Enterprise Esquire to find out how forming an LLC can protect your life savings and help you be a better business owner. We respect the personal and financial investments you’ve made into your company. That’s why we offer high-value, low-cost business formation packages which are tailored to meet your needs. Contact us today and learn more about how the Enterprise Esquire can help you.