For Indiana businesses, the limited liability company – or LLC – can be a powerful tool for protecting personal assets by shielding entrepreneurs from personal liability. From a business standpoint, that can help to ensure that your home, car, and other personal property are not at risk if the business is ever sued for any reason. The LLC’s real value extends well beyond that protection, however, and extends even into the realm of estate planning. To maximize the benefits that you can enjoy from this type of business organization, however, it can be helpful to understand how LLCs are formed, why they work the way they do, and why you should care.
LLC Formation: Building the Perfect Liability Shield
To make use of the LLC structure, you must intentionally create an LLC. Though this can be done on your own, it is often wise to rely on the advice of an attorney to help ensure that you’re doing everything properly. If you do choose to do it yourself, however, there are several important steps that must be followed:
- Give the LLC a name. This process has a few important requirements. First, you do have to include the words “LLC” or “L.L.C.” or “Limited Liability Company” at the end of your company name. For example, if you wanted to name your company “Acme Coyote Supplies” then it would need to include one of those three LLC designations at the end of the business name – like “Acme Coyote Supplies, LLC.” You also need a unique name that is not already recognized by Indiana’s Secretary of State You can run an availability check by using the state’s online business search tool.
- You’ll need to appoint a registered agent for your LLC. That’s the person responsible for accepting any legal papers that would be served in the event the company were ever sued. That person or legal entity can be a resident of the state, or any foreign entity with permission to operate in the state, but must have an Indiana physical address.
- Once you have a name picked out, you must create and file Articles of Organization that include pertinent information like the LLC name and address, and that of its designated registered agent. You must also include details about whether the company will be operated by a manager or by its members, and if it will be in existence for only a specified period or in perpetuity. These Articles must be filed with the Indiana Secretary of State Business Services Division.
- You may also create an operating agreement to provide details about the actual operational guidelines for the LLC. This is not legally required in the state of Indiana, but most experts agree that it’s a good idea to have one – especially when there is more than one owner. Note that even if you do create one, there is no need to submit it to the state.
- Multi-member LLCs need a separate IRS tax number, known as the Employer Identification Number, or EIN. Single-member LLCs need an EIN only if they have other employees or choose to be taxed as corporations.
- Certain types of businesses may also need to register with the Department of Revenue in Indiana, for sales tax collection purposes, or obtain certain types of business licenses.
- Finally, LLCs need to maintain their LLC status by filing Business Entity Reports on a biennial basis. These reports are delivered to the Secretary of State every other year, along with a small filing fee.
How Do LLCs Do What They Do?
LLCs are considered distinct legal entities, rather than appendages of their owners. Thus, the limited liability company can purchase and own assets, assume liability for its own company debts, and entire into its own contracts. Like a corporation, it is essentially its own being. It has far fewer reporting requirements than the average corporation, however, which is why it has become such a popular choice for many business owners.
Because the LLC is a separate entity in the eyes of the law, the company is responsible for any debts that it accrues. Under normal circumstances, any debts owed by the LLC are its own, and only company assets can be pursued by litigants or creditors. That protects the owners’ assets from being put at risk, limiting LLC member liability in a way that partnerships and sole proprietorships cannot.
It’s important to note, however, that there are times when that liability shield can be weakened. For example, if the owner co-signs for an LLC loan, pledges his own assets as collateral, engages in fraud, or comingles personal and business assets. These and other operational mistakes could cause a court to ignore any liability protections and allow creditors and litigants to go after the LLC owner’s personal assets.
Why Should You Care About LLCs?
If you own a business and haven’t taken steps to deal with those assets in your estate planning efforts, then you certainly need to care about what an LLC can do for you. Your company assets need to be managed in a way that protects your personal wealth, to ensure that your estate plan cannot be disrupted by those who might sue your business. Without the right corporate structure in place, your personal assets could be just as vulnerable as your company assets. It’s difficult to have confidence in any comprehensive estate plan when you have that kind of risk looming on the horizon.
The good news is that an experienced estate planning and business planning attorney can provide you with the assistance you need to protect yourself from those risks. At Frank & Kraft, Attorneys at Law, our expert team can help you to minimize your business risk by strengthening your LLC’s protections or converting your existing business to an LLC so that you can take advantage of that structure’s many safeguards. Business owners need the peace of mind that LLC formation can bring, and we’re committed to helping our friends and neighbors achieve that sense of security. To find out more about how your LLC can protect your company and secure your future legacy, call us at (317) 684-1100, or contact us today at our website.
Mr. Kraft assists clients primarily in the areas of estate planning and administration, Medicaid planning, federal and state taxation, real estate and corporate law, bringing the added perspective of an accounting background to his work.
Latest posts by Paul A. Kraft, Estate Planning Attorney (see all)
- If a Beneficiary Dies During Probate What Happens to the Inheritance? - September 18, 2019
- Is Your Power of Attorney Powerless? What to Do When a Third Party Won’t Honor an Agent’s Authority - September 11, 2019
- Are There Different Types of Special Needs Trusts? - September 4, 2019