A Limited Liability Company

I’ve never lived in a dog house. I prefer the comforts of air conditioning in the summer and heat in the winter. I love my chaise with my cozy wool blanket with a thin coat of my own soft fur to help me nap. I don’t ever want to lose my home.

This is why it’s important to properly setup your business, so that you protect your personal assets from your business assets.

• Corporation – This is the most complex form of business organization. Corporations are comprised of shareholders, directors, and officers. So, unless you expect to make millions of dollars on that new and improved dog bed with built-in whoopee cushion, want your activities closely regulated, involve extensive record keeping, and be taxed both at a corporate and a personal level, then this may not be the best route to go.

• Partnership – A general or limited partnership has two or more participants and is easier to establish than a corporation, start-up costs are lower, and you’re not liable for an associate’s negligence or mismanagement. However, partners are personally liable for contractual obligations and debts.

• Limited Liability Company (LLC) – This option is probably the preferred choice for new businesses. Owners of LLCs are called members (not partners or shareholders) and only one member is required, but you can have as many members as you wish. An LLC is less formal and more flexible than a corporation. But the most important aspect is that members cannot be found personally liable for company debts. Your individual assets are separate from the assets of the LLC; therefore, in the case of a dispute, your personal assets cannot be seized. In addition, you are only required to pay taxes on your earnings one time instead of paying both business and individual taxes.

Years ago, when we came up with our company name of IBeOn, we filed as an LLC. However, when we came up with the idea for CoolZips® zipper pulls, instead of creating another LLC, we decided to file as a DBA (this means “doing business as”) within our state. This allows us to legally do business as CoolZips.

If you plan to operate your business under a name that is different from your company’s legal name, then you must register as a DBA. You can then legally open a bank account and conduct other business using this second name. For us, this was critical as we wanted to build name recognition for CoolZips without going through the hassle and other expenses of setting up a separate LLC.
In addition, if you’re planning to sell a number of products, and want to create branding for each product, then setup your main company name as an LLC and then file the name of each product as a DBA. This will help you to control expenses and allow you to effectively expand your business.

So, keep yourself out of the dog house and contact your state’s Department of Labor & Economic Growth division to setup an LLC and/or DBA. Your family, including man’s best friend, will greatly appreciate it.