How to Determine If Your Business Is Eligible to Become a Limited Liability Company

To determine if your business is eligible to become a limited liability company, it's essential to understand why people choose this business model. The limited liability company, or LLC, is used mainly as a way to protect business owners from personal liability for debt. An LLC is more complex to set up than a sole proprietorship or a partnership, but in many cases, the benefits outweigh the costs.

Things You'll Need

  • Computer with Internet access
  • Legal consultation
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Instructions

    • 1

      Sit down with your small business adviser or attorney to determine how much effort and money you want to spend to set up the business. If you want a simple start-up and have limited capital, then starting as a sole proprietorship or partnership might make the most sense. You can always change your status.

    • 2

      Consider the personal liability you are likely to see as a business owner. If you expect a high degree of personal liability, it might make good sense to form an LLC right off the bat, regardless of expense.

    • 3

      Consult your lawyer to draw up the articles of organization for a limited liability company if you've decided your business is eligible to become an LLC. Your lawyer will also be useful in helping you and your partners create the operating agreement.

    • 4

      Prepare for a couple weeks of processing, in most states, to create your limited liability company.

Tips & Warnings

  • Seeking advice from the Small Business Administration, as well as a good small business attorney, in the initial stages of your business will help you make the right decision as to its structure.

  • Though choosing to be an LLC will limit your liability when it comes to financial risk, it is not a cure-all for liability issues. You will still stand to lose your investment in the company should your LLC's assets get seized, for instance.

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Comments

  • christophd Jan 11, 2010
    This article says nothing about determining eligibility. It should be re-titled.

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