LLC's - What They Are and Why You Need One

A question that I received last week from a fellow businesswoman was “What is an LLC and do I need one?”

The short answer to this question is first, an emphatic “Yes!” The rest is a bit more technical. I will try to explain this as simply as possible (keeping in mind that I am not an attorney!)

Let’s think of it like this, you have been in business for yourself long enough that you know that your business is going to be something that will be around for long term. So now what? There are several steps to the LLC process, which I will discuss in later postings, but for now I will focus on what an LLC is and the benefits of becoming one.

First, LLC’s, or Limited Liability Companies, protect you personally; by having an LLC in place, you will protect your personal assets. How is this? When you form an LLC, all of your business dealings under the LLC are recognized as dealings by the Limited Liability Company, not as you, the individual.

Confused??? Here is an example:

Megan is a photographer and shoots an engagement session for a client. During the session, Megan has her client hang from the side of a building (which I sometimes do in my own photography!) and the client falls and breaks every bone in her body.

Second scenario: Megan shoots a wedding and her memory cards all catastrophically fail and all of the wedding images are lost (God forbid!)

Now let’s look at the consequences of Megan with an LLC and Megan without an LLC:

With an LLC, if Megan is sued by either of these clients, any damages awarded to the clients would come out of the LLC’s profits and holdings rather than Megan’s personal finances. Even better, let’s assume that as an LLC, Megan is a smart girl and has business insurance and the settlement is covered under her insurance policy. This way Megan’s personal finances are completely protected and she won’t have to worry about wiping out her kids’ college funds to pay a settlement!

Without an LLC, the clients would need to sue Megan personally and could potentially wipe out Megan’s life savings and would not only ruin her financially, but could ruin her entire business as well. As an individual you do not have the luxury of having business insurance because you are an individual, not technically a business owner.

There is so much more to this and there are many steps in the process of creating an LLC. In the future, I will blog about how the process works and show you that there really is no need to spend upwards of $600 on an attorney to put together your LLC, when you can easily put together an LLC for $200 or less.

Sarah Adams
Dandelion Network Founder