Why You Should Work With An Attorney To Create Your LLC
Creating an LLC is an important step in the early days of your business. When done properly it can protect you and your business from disastrous financial consequences. If you have searched on the internet “how to create an LLC,” then you have been bombarded with ads selling DIY kits promising to help you form your LLC without the help of an attorney. Choosing to save a few bucks on such a critical aspect of your business’ core structure can cost you big in the long run. Below we discuss why it is important to work with a knowledgeable attorney.
Determine Whether An LLC Is The Right Legal Entity For You
Forming a Limited Liability Company can provide your business with many benefits, most notably limited liability for debts and judgments while allowing for flexibility in how you operate the business. But there are numerous other issues to think about in determining what the proper formation option is for your business, including taxation and ownership issues, partnership issues down the road, and the way your potential investors will be looking at your business structure in deciding whether to invest.
An LLC is only one of several formation choices. You might also consider forming a corporation, limited partnership, sole proprietorship, general partnership, or other form of limited liability entity. An attorney can walk you through all the benefits and drawbacks of each of these entities as they apply to your specific situation.
State Offices Cannot Provide You With Legal Advice
Many entrepreneurs that are building their businesses do not have the luxury of in-house counsel or unlimited funds for outside consulting. This lack of funding makes the DIY approach seem appealing and easy. This can be a great approach to learning about LLC’s but puts you in a bad position. The state authorities you might interact with in forming your LLC can give you limited instructions on issues such as where to send your templates, but they are legally prohibited from giving you legal advice. Only a licensed attorney can legally give you legal advice on forming your LLC.
Legal Requirements To Create An Effective LLC
In starting your Limited Liability Company, you will have to meet numerous legal requirements in order for the LLC to be effective in the
eyes of the state (See SC Code). Failure to do so can create significant delay for your business and may open you up to huge liability in the meantime. These legal requirements include:
- A legally valid name for your LLC
- Drafting and filing legal documents such as Articles of Incorporation that meet state standards
- Filing fees
- Drafting a custom and appropriate LLC Operating Agreement
Your Operating Agreement Dictates All Your Rights In Your LLC
Sadly most LLC’s don’t have Operating Agreements, and arguably the most important part of an LLC is the Operating Agreement! An Operating Agreement establishes the rights, obligations, and duties of the members of your LLC. It dictates how the members will run the company and share in both profits and liabilities among other things. It is critical an Operating Agreement be drafted comprehensively and fairly, anticipating all types of future issues. Without an attorney representing the interests of all the members you run a high risk of future conflicts and financial risks for you and your business. In fact, we find one main reason partnership disputes don’t get settled properly is because the operating agreement is silent or ambiguous on crucial issues that partners face when running their business.