The type of business you intend to operate, the number of owners of the business you intend to have, and your financial wherewithal (and resultant tax implications) are typically the primary criteria for determining what business entity, if any, you should use in forming a business entity. In other words, one size does not fit all and the correct business entity (i.e., limited liability company, professional limited liability company, corporation and limited partnerships) all have their benefits and detractions depending upon the criteria listed above.
In all scenarios, we recommend you purchase insurance if possible to help secure against any possible problems that may arise due to your future business’s activities.
If you operate a business without using a corporate entity, you risk the possibility that your personal assets may be at risk if a problem arises due to your business’s activities. For that reason alone, many people use corporate entities.
One of the most popular corporate entities is the limited liability company (i.e., the LLC). A limited liability company is a separate legal entity that can be owned by one person known as a “member” or it can be owned by many persons. Key aspects of the LLC are that: (1) LLC’s can choose how they wish to be taxed (e.g., as a pass-through entity where the income goes directly to the owner’s tax return or as an S-Corp), so long as the tax election is proper under applicable law; and (2) members are not personally liable for debts of the LLC unless they were personally involved in a wrongful act.