As a business owner, the question is not "if" you will be sued; rather, it is likely "when" you will be sued. To protect against personal liability, the Limited Liability Company (“LLC”) has become one of the
more popular entities chosen by business owners to operate their respective
businesses. The LLC provides the flexibility and ease of creation of a
partnership while at the same time establishing a liability shield similar to a
traditional corporation.
My experience in meeting with business owners is
that there is a common misconception that so long as Articles of Organization are
filed with the Ohio Secretary of State, the owners will get the full protection of
the LLC. However, in order to be protected from personal liability, you must
establish that the LLC is a separate entity from you as the owner (or owners).
In order to do this, it is advisable to take some steps above and beyond merely
filing the Articles of Organization.
First, you need to choose a business name and make
sure it is available. In Ohio, the name of your LLC must contain some specific
words, as well as be distinguishable from any other names on file (with some
limited exceptions). Typically you complete this step before filing the Articles of Organization.
You should also negotiate and execute an Operating
Agreement. An Operating Agreement will differ if the LLC is a Single Member LLC
versus a Multimember LLC. Additionally, the Operating Agreement should address
tax treatment, buy-sell options, management, capital contributions required
from each Member and how profits and losses will be allocated. While there are
template Operating Agreements available, an Operating Agreement should be
tailored to your business, your Members and your specific situation to increase
the likelihood of protection from personal liability.
At Hallowes & Ebbeskotte, LLC, we create and maintain a Company Minute Book for your LLC that includes all of your company documents, including
the Articles of Organization, the Operating Agreement, Subscriptions to
Membership Interests, Organization Minutes, Membership Interest Certificates, Descriptions
of Membership Interests, and Capital Contributions.
Don’t forget to determine what tax and other
regulatory obligations the LLC is subject to, along with any required
registrations. These include requesting an Employer Identification Number
(“EIN”), registering for Ohio payroll taxes and BWC coverage, and required
notifications when new employees are hired.
Once the LLC has obtained an EIN, the Articles of
Organization have been approved, any requisite local licenses and/or
registrations have been obtained, and bank accounts have been opened on behalf
of your LLC, you are ready for business.*
Remember, to protect yourself from personal liability, it is critical that you take the proper steps to establish the liability shield a limited liability company can provide. Visit http://thehelawfirm.com for more information on how the business law attorneys at Hallowes & Ebbeskotte, LLC can guide you through the necessary steps.
*Future posts will address the importance of
refraining from co-mingling your personal funds and assets with the funds and
assets of the LLC in order to maintain personal liability protection. Stay
tuned…
