6 Benefits to Limited Liability Companies

What is an LLC, and why should you get one? LLCs are a powerful and flexible corporate form that provide incredible opportunities and protection for business owners. Even if you’re a small business, an LLC can provide a platform to grow and protect your business—and if you’re large, it’s definitely time to look at the benefits an LLC can provide.

Limited Liability Company

  1. LLCs Shield You from Liability

LLC stands for Limited Liability Company. When you form an LLC, you’re forming a company that limits your liability. LLCs are a “shield” that limit your legal liability for business decisions and mistakes that might otherwise harm you or your family.

For example, let’s say your business is installing hot water heaters. You sign a contract to install a hot water heater in a large office building, and you install the heater, but unfortunately, you are having a bad day, and you make a mistake, and the heater bursts and causes flooding in the basement of this office, or it causes someone to get burned, or maybe it just doesn’t work, and the business loses money because they don’t have hot water for a few days.

So what happens? You get sued—you do, personally—because you messed up. You breached a contract, your negligence caused an injury, your product that you re-sell subjects you to strict products liability, or all of the above. When this business and the injured employee and the office building’s owner or property management company sue you, they’re suing you, personally. If they win, they can collect that judgment by putting a lien on your house, by attaching your bank account, etc.

Now how would an LLC have helped you here? Simply put, if you run a company and make your contracts in the company’s name, then your breach of contract and other issues result in a suit against the company. That means your personal assets are not at risk. You aren’t personally being sued, you don’t personally have to report lawsuits against you personally if you’re seeking a mortgage, you can sleep a little better at night. It doesn’t mean your business won’t suffer from the lawsuit, it just means there’s a sealed wall between you and your company. Your company, in other words, limits your liability.

It’s important to note this doesn’t mean you can’t ever be sued personally for your actions, but if you set up your LLC properly, you will eliminate most of the situations in which you can be personally sued.

  1. LLCs Allow Complex Forms of Ownership

 If you’re a small business with a single owner, you can skip this one, but for family-owned businesses or startups with your college buddies that have quickly become lop-sided, an LLC allows you to setup virtually any ownership structure that you can dream of.

Does one person handle one aspect of the business? Does someone do most of the day-to-day management, while others contributions are physical assets or money? Such “lopsided” investments can be difficult to manage without an LLC as everyone’s contribution should be valued, but not everyone needs their “hands in the stew” of day-to-day management. Setting up your LLC with a board of directors or a day-to-day manager but giving financial ownership to those who’ve invested allows you to solicit investment without giving away power.

Similarly, using LLCs to shield risky investments from assets allows a business to grow in a more stable fashion. One example is setting up an LLC to protect real estate investments from one another. Using an LLC to purchase property, and setting up separate LLCs for each property allows a real estate business to protect one piece of property from the dangers that might come from another. If an injury occurs on one property, there is no liability attaching to a property owned by another LLC under the same company.

  1. LLCs allow Outside Investment

 Do you want to take on angel investors, or sell stock? The terminology is different (stock refers to a corporation’s ownership structure), but the function is the same. By offering investors a different class of “membership” (ownership), you can sell financial stake in your company without giving up control to the investors.

  1. LLCs can be sold

 Do you foresee the possibility that you might want to sell your business down the road? Your business may be satisfying now, but in thirty years, will you want to consider a second career? Would you like to be bought out for a huge amount of money in a few years by a company that thinks they can do something huge with your startup? Setting up an LLC makes it much easier to sell your business to someone who wants to take over your client list and assets one day.

Technically, you can always sell your business, even without an LLC. But many lawyers will advise a potential buyer to look elsewhere if your business is not well organized. Having an LLC that is properly setup and running encourages a potential buyer that their purchase will be easy to roll over into a new or existing business.

  1. LLCs Let you Take Risks and Go Bankrupt

 I realize this sounds a little crazy, but have you ever wanted to try a risky business? Have you ever wanted to take a leap? As discussed in number one, above, forming an LLC allows you to protect your personal assets. If your business goes belly-up, you aren’t putting your house at risk, or your personal credit.

Note, however, that this point is somewhat limited. Yes, the LLC will be liable for debts, but if you’re taking out enormous loans for a young LLC, you may be forced to co-sign. As always, it’s not just forming the LLC that matters—it’s how you manage and run it.

  1. LLCs are the New Corporations

 What about corporations? Should you consider one of those instead of an LLC? In short, LLCs are a new corporate form that has replaced corporations. Many companies will continue to run as corporations—and there’s nothing wrong with that. But new businesses starting up today should use LLCs except in very limited circumstances (where you expect to be publicly traded, or where you want to be nonprofit). Even those exceptions may soon be reduced.

So should you form an LLC?

Forming an LLC is almost never a bad idea, but the return on investment depends on the nature of your business and what your various risks are. Call the Cornerstone Law Firm, LLC today, and let’s talk about how we can help your business grow.

National Park “First Amendment” Signs Should Come Down

Last week, after observing signs in National Parks purporting to limit the exercise of the First Amendment, Joel Ready sent the following letter to Ryan Zinke, Secretary of the Department of Interior, and to Michael Reynolds, the director of the National Park Service.

Dear Sec. Zinke:

At the end of August, I honeymooned with my wife in the Smoky Mountains National Park. The Smokies are a sort of home away from home for my family. I spent many summer weeks there growing up, and of course, my wife and I now have wonderful memories of the park as well. The park has earned its place as the most visited park in America, with its lush beauty and unique wildlife. We had the opportunity to quietly observe two black bears while we were there, as well as to visit Clingman’s Dome and Cades Cove, among other sites.

However, I write to let you know of a concern I had while visiting the Smokies. During our trip, we stopped at one of the visitors’ centers,[1] where we were confronted by [the sign pictured above].

As you are probably aware, Mr. Secretary, the First Amendment cannot be confined to a small portion of government-owned ground. The First Amendment is designed to prevent the “abridgment” of speech, no matter where it occurs. Nowhere is this protection stronger than on government property. While the government is free to engage in reasonable “time, place and manner restrictions,” such restrictions must be content-neutral, narrowly-tailored to advance a significant government interest, and leave open ample alternative channels of communication.[2] Parks are “quintessential public forums [where] the government may not prohibit all communicative activity.”[3] I believe that no compelling government interest is at play here, and that these zones in front of visitors’ centers[4] (making up only a fraction of a percent of the total park) do not constitute a “narrowly-tailored” solution in any event.

The Smoky Mountains National Park, like our nation, was born in the cauldron of political dissent and protest. When the federal government used the powers of eminent domain to seize the land in the 1920s and ‘30s, a number of evicted local families protested in different ways, including protesting FDR’s speech in the park (which was, of course, full of political statements, as any Presidential speech would be).[5] Political speech in our national parks is a proud tradition, and the federal government has no place in attempting to curb speech by creating “zones” where it is acceptable or unacceptable to speak.

In our travels through the park, we encountered a number of violations of this sign, including Jehovah’s Witnesses with displays who were handing out tracts about their faith, the National Park Service’s signs throughout the park arguing for better environmental protection legislation and lauding past EPA efforts, and a small child protesting to her mother that she was done with her sack lunch (most of her sandwich was still uneaten). From the loftiest sentiments (those about religion) to the most trivial (private disputes between mother and child), all of these are speech protected by the First Amendment from government abridgment, and all of them are presumably prohibited by the sign at the visitors’ centers.[6]

I have no reason to believe any enforcement action has been taken against groups or individuals based on these signs. Nor do I harbor any suspicion that you personally authorized these signs. Rather, like so many things, our liberties are slowly eroded by the well-meant actions of individuals attempting to prevent pesky protestors from marring natural beauty or causing disruption. But protests and political speech do not mar natural beauty as quickly as oppression. I hope you will not think I overstate my case with the word “oppression”—rather, the attempts of government to snip at the fringes of free speech are always the first signs of the erosion of natural liberty. The American people are free to speak and advocate for their beliefs on government property, and these signs should come down.

With great respect and appreciation, I write to request that you remove these signs from all National Parks and any other similar government-owned properties where they may be found.

[1]              The visitor’s center we visited was Sugarlands Visitors’ Centers, where we encountered very kind and helpful rangers and other workers.

[2]              The caselaw on this point is voluminous, but one example should suffice: Perry Educ. Ass’n v. Perry Local Educ. Ass’n, 460 U.S. 37, 45 (1983).

[3]              Id.

[4]              I was unable to ascertain whether these signs are present at all visitors’ centers in the Smokies, or at all parks nationally, or whether this one visitors’ center was an anomaly. I presume that they are present nationally, but my argument is not affected if this visitors’ center is the only example.

[5]              Both silent footage and text of the speech survive. The footage can be viewed on youtube: https://www.youtube.com/watch?v=RnJbJbcr3jw. The text of the speech is also available: “Address at Dedication of Great Smoky Mountains National Park.,” by Franklin D. Roosevelt, September 2, 1940. Online by Gerhard Peters and John T. Woolley, The American Presidency Project. http://www.presidency.ucsb.edu/ws/?pid=16002.

[6]              Political t-shirts, personal conversations, bumper stickers on cars and license plate messages, and “pillow talk” while camping under the stars are all presumably prohibited by the sign, as well.