New York small business owners might be familiar with the concept of a Limited Liability Company (LLC). It’s often seen as a way to give credibility to your business, but it can also have some significant legal benefits.
What does an LLC do?
When you’re just starting as a business owner, it can be hard to separate the business from your other accounts. A LLC creates a crystal clear distinction between business and personal assets.
This is helpful in a lot of ways. If your business is sued or has to file for bankruptcy, an LLC will help your finances stay out of the misfortune.
How to form an LLC
Starting an LLC varies from state to state, so New York’s rules aren’t the same for other states. Generally, the business owner(s) will want to file the Articles of Organization with their local government.
Articles of Organization are documents that address all the members of the company, what their duties and liabilities are, and other obligations. There’s also a fee when you apply.
The federal level of government will then ask for more paperwork or may ask for you to provide more information. Your LLC will receive an employer identification number (EIN) upon approval.
When to start an LLC
An LLC is good for small-to-midsize companies looking to formalize their process and grow to a reasonable size, while remaining in the realm of small business. If business owners want to take their company public, an LLC might not be the right choice. They may want to consider making their business a corporation instead.
Companies have other filing options – like a partnership, sole proprietorship, etc. But it is ultimately up to the business owners to decide if becoming an LLC is right for them.