4 Reasons Why Limited Liability Companies Need a Business Lawyer
Today, a number of limited liability companies or LLC’s are gaining importance in the U.S market. LLC is defined as a specific form of private limited company whose members can’t be held personally liable for company’s debts and liabilities that imbibes assets of limited liability of a corporation with the pass-through taxation of any sole proprietorship or partnership. These LLC’s have various legal aspects ingrained into the finer print of their business model that need carefully evaluation by a qualified small business attorney. Let us take a closer look into four such legal and financial aspects of an LLC, handling of which often business lawyer’s expertise.
1. Handling Limited Liability
When an LLC gets sued, the personal assets of its members such as real estate and bank accounts remain untouched, only the money that they put into the company bears the brunt of the legal action. Having said that, it is necessary that you hire a business lawyer to avoid being exposed to any personal liability, because the aforementioned immunity is not absolute (members can still be accountable for any criminal wrongdoing).
2. Taking Care of Pass-through Taxation
Pass through taxations are an integral part of any LLC business model. It implies that an individual has to pay taxes on every income obtained from the business, besides their individual tax returns. This is generally applicable to partnerships and sole proprietorships, and differs from traditional taxation, wherein it is the prerogative of the company itself to pay taxes on the derived income, and not on the individual income. Hiring a business lawyer helps you understand the difference between the two taxation types, and the accountability of income for certain federal taxes.
3. Structuring Limitless Ownerships and Imbibing Allocation Flexibility
In Limited Liability Corporation structure there is no limit on the number of individuals that can file as owners, unlike other corporate models. In addition, there is no condition that specifies that any member’s investment has to equal to his/her ownership percentage. Typically, an operational agreement consists of varying percentages of profits and losses for individual members in an LLC, irrespective of their initial investments. That’s when a reputable business lawyer can help you draft an operational agreement in a systematic order.
4. Ensuring Freedom of Management
One highlight of LLCs is their hierarchical structure in the organization, which completely differs from standard corporations. There is no concept of having a board of directors, stringent book maintenance requirements, and convening annual meetings. Subsequently, the business operates on self-made terms of the owners. In such scenario there’s a possibility that the business process go haywire. Getting a reputable business lawyer can help your company avoid any such situation, and streamline business operations.
Limited Liability Companies are poles apart from traditional organizational structures, in terms of their operations and structuring. As there is no concept of having a board of directors to formalize business policies and determine profit sharing, LLCs, small businesses, and start up businesses, often require business lawyers to streamline their operations, and provide definition to their organizational hierarchy. If you don’t have time to find a qualified business lawyer in your Austin or any other place, seek assistance of a lawyer referral service provider.