The most important decision you make as a business owner, whether starting a new business, purchasing a business, or reviewing a current business entity, is choosing the legal structure that will protect your personal assets. There are three to consider.
Legal Business Structures
Doing Business As (DBA)
This option is simply filing a fictitious name registration for your business with the Missouri Secretary of State’s office. The biggest drawback to operating as a DBA is that there is no distinction between your personal assets and your business assets. Simply put, if sued in the course of your operations, you stand to lose your personal as well as your business assets.
Limited Liability Company (LLC)
The most popular feature of the LLC structure is personal protection from business liabilities. With an LLC in place, a lawsuit against your business may clean out your business assets but likely won’t cost you your family home.
An LLC provides operational and tax flexibility. Documented in the operating agreement, your LLC can be formed with more than one owner and have the operational flexibility of a partnership. LLCs can be taxed as a sole proprietorship, partnership, or S-Corporation.
This option provides optimal protection of your personal assets. However, there are corporate formalities that must be kept current. These include annual filings with the Secretary of State’s office, annual meetings properly held and documented, and by-laws in place and current.
Generally, forming an LLC is a good fit for many small businesses. However, a conversation with your attorney is a good idea. Don’t think you’re too small to take this important step. You shouldn’t wait until you’re a certain size, have a certain amount of revenue, or begin hiring employees. I also urge clients to consult with their accountant before creating any business entity due to the individual tax implications involved.
We invite you to contact our office to discuss your business entity structure because at the 417 Business & Elder Law, we listen as you share your business goals and discuss the options available that best fit your needs. We then prepare and file the necessary documents you need to get your business off to the right start.
This article was also published in the printed version of the Volume 15 Apr-Jun 2019 Newsletter (PDF).
Please call our office at (417) 887-4170 if you have any questions about this article or would like to receive our mailed newsletter.