To LLC or Not to LLC ...

Another post from Heather! Heather practices law in North Carolina, with specialities in estate planning and business law. You can read more about her at www.ampersand-law.com

If you work for yourself - or are considering starting a small business - you may be wondering whether it's necessary to formally "organize" the business under the laws of your home state. ("Organize" being the legal term used when you form a Limited Liability Company (LLC) or Corporation or other business structure under the relevant state laws.)

In North Carolina, generally speaking - you are not required to form an LLC or a Corporation or any other legally recognized business organization to "open" your business. (Exceptions, of course, apply. It is the law after all - exceptions always apply.) This means you can run your business as a sole proprietor or as a partnership or in a number of other ways without filing any business organization documents with the state. (Of course, there may be /likely are/ other non-organization documents you must file with the state and federal government to open & run your business.) 

So if you don't *need* to do it, why should you make your business an LLC? 

  • It's quick and inexpensive. The paperwork required by the state isn't lengthy and the filing fees aren't outrageous. 

  • Ongoing paperwork filing requirements for the state tend to be minimal. 

  • You can still file taxes as an individual. (It's called "flow-through taxation" and if you (1) read this post and (2) ask me about "flow-through taxation" in person, you'll be rewarded. And don't worry, the reward won't be a lecture on the wonders of the Federal Tax system.) 

  • How you distribute profits is up to you (unlike a corporation). 
  • And - your personal liability is limited (hence, the name "limited liability company!). This means if the business takes on debts or gets sued - your personal assets can be protected. (But yes, exceptions to this do apply.) 

Are there reasons not to form an LLC and/or to chose a different business structure, like a corporation? Certainly, and an attorney who practices business law (like me) can advise you on the pros and cons of each. 

But, if the question is, "To LLC or to do nothing?" the answer is most likely LLC.