Businesses have different requirements. Some may need a full team of executives and shareholders to run their businesses, while others do not. Business owners can now form a single member limited liability company (LLC) in various states.
How is it different? The answer is simple. Because of this, you can now create your business without having to deal with some formalities that corporations require. A single member LLC combines the benefits of limited personal liability and the transferability of ownership. It is also as flexible as a sole proprietorship.
Running a business comes with responsibilities. The same is true about this type of business. As an owner, you should know how to manage your company properly because your success relies on it.
Clear Distinction of Finances
You should keep the business finances separate from personal expenses. An LLC comes with liability protection. But it may not be as effective if the company’s and the owner’s assets get mixed up.
There were some cases wherein courts have decided to overlook the liability protection. These instances happened because there was no distinction between the assets of the companies and those of the owners. To help protect you and your company from the possibility of facing legal or financial problems, keep track of the financial situation of your business.
Separate Credit Lines
As mentioned earlier, you should make sure that your business and personal finances are distinguishable. You should do the same when it comes to credit lines.
If you plan to secure funding or have collateral for your business using your personal credit, it is advisable to consult an accountant or a professional. They will help in ensuring the booking of the transaction as revenue for your business.
Being a single member LLC may require less paperwork, but it does not mean you should not focus on it. You should ensure compliance and file all required paperwork in the state where you are operating.
Paperwork may differ depending on state laws. Keep track of deadlines and complete all forms on time. Always keep your company information updated. Some people find handling paperwork a bit overwhelming. That is why they hire a professional services company to handle it for them.
Invest in Insurance
Insurance can be your best protection against financial loss. As an owner of an LLC, you may have some protection against liability. But you and your company are still vulnerable to possible lawsuits.
For example, single member LLCs do not have protection against personal liability claims due to litigation. There are some cases wherein the owner is liable for claims related to product liability or nonpayment of debts. That is why you should have the proper insurance. There are various types of insurance available for businesses. You can get one or have a combination of policies for more coverage. Make sure you choose the one that offers the most protection.
Update Licenses and Permits
Aside from having insurance, another way of protecting your company is to always comply with the laws. You should also make sure you have the right licenses. Keep them updated. Check your federal, state, or local laws about permits and licenses to lessen your company’s vulnerabilities against legal and financial issues.
Sometimes, the best way to ensure success is to rely on the help of industry experts. Experienced professionals can provide you with helpful tips on the proper organization of a single member LLC. Asking for help may be the best decision for your company.
There are also mentorship programs that big organizations sponsor. Take advantage of these and expand your knowledge. This way, you can have opportunities to learn more ways to protect your LLC. You can also get to meet other entrepreneurs like you and exchange ideas with them.
You can also consult with a third party professional services company that is knowledgeable about maintaining an LLC as a single member. They can provide you with details and help you understand the process and industry.
Owning a business is not easy. Yes, it can be exciting. But no matter how big or small your company is, you will face some challenges. A single member LLC, just like any other business, is also vulnerable to a lot of risks. It has its advantages, but it also comes with responsibilities. That is why you should make sure you understand every aspect related to running an LLC as a single member.