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LIMITED LIABILITY COMPANIES
Business structure is super important for a lot of reasons and there are several options, but we are going to focus on limited liability companies (LLC) here.
Limited liability companies provide limited liability for all of the members in the business. Which is by far the largest perk in my opinion. Further, you get to choose your taxation structure and there are minimal requirements to get an LLC started and maintained.
To get started, hire a lawyer and pick a cool name for your business, then your lawyer will file for your Articles of Organization on the Oklahoma Secretary of State. This is actually all that is required by law in Oklahoma. But I always suggest you have an operating agreement to help run your business smoothly and limit your liability.
An operating agreement lays out the rules of your company and will define how changes within your company are handled. The operating agreement can be changed in the future but having a set of rules between the members of the business at the outset is crucial.
Within your operating agreement, you should think about what would happen if you or your business partner dies, gets married, or simply doesn’t want to do the business anymore. All of these events could result in a lawsuit between you and your business partner if there is not a clearly defined plan in the operating agreement! Although it is not required by law, having a separate bank account for business can also help from comingling.
LLCs are extremely awesome if you don’t comingle your assets. The largest perk of an LLC is that you, as an individual member, are afforded limited liability while operating your business. That means you aren’t personally on the hook for the debts or liability of your company. For example, you as an individual own a home or a car, when your company gets sued, you don’t want someone to be able to take those things away from you because they are yours, not your company. But, if you comingle your assets, like your money, you can lose that limited liability protection and your creditor can pierce the veil and take your stuff. Which is bad.
Taxation of an LLC. Consult your CPA at this point because the tax consequences can be different for each person. Your LLC can be taxed like a partnership, which flows through to the individual members, or like a corporation. There are benefits to both but a CPA can advise you on the best option for you and your business partners.
