When you start a business, you make many decisions that can significantly impact the company’s future. One of these critical choices is how you legally structure your business. What benefits might a limited liability company (LLC) structure offer?
Choosing an LLC structure limits your personal liability
Business structures like sole proprietorships and partnerships do not divide the company from its owner or owners. As a result, owners are personally responsible for losses and debts accrued by the business.
Limited liability companies, on the other hand, do precisely what their name suggests: limit owners’ liability by creating a clear divide between the company and its owner. This helps you manage your personal risk, protecting your finances and possessions if your business struggles to pay a loan or faces a lawsuit.
Requirements to form an LLC in Pennsylvania
If you decide an LLC is the optimal structure for setting up your business, there are several requirements for formation in Pennsylvania:
- Select a unique name for your business that includes “company”, “limited”, “limited liability company” or an abbreviation (LLC or LTD) within the title.
- Designate an official mailing address or registered office in Pennsylvania.
- File all necessary paperwork including a Certificate of Organization and docketing statement.
If your business employs multiple individuals, there is also the additional requirement of obtaining an Employer Identification Number (EIN) from the IRS. While not specifically required, you may also benefit from developing an operating agreement that outlines the groundwork for your business and what happens in the event of your death or business dissolution, something your personal will or estate planning cannot handle.
While choosing to structure your business as an LLC can offer several benefits, entrepreneurs should consider all their options when forming a company. Choosing the right structure can be a crucial step toward your future success.