Starting a new business is exciting. Many Georgia entrepreneurs happily anticipate the prospect of being their own boss and fulfilling their dreams of being a business owner. However, liability issues must be considered during the business formation process in order to reduce the probability of those dreams being shattered if the business is sued.
No one likes to contemplate worst-case scenarios, but doing so leads to creating a plan to protect the individual in case something happens. The business structure could have a profound effect on an individual’s exposure to liability. General partnerships and sole proprietorships leave the business owner the most vulnerable. It may be worth considering a more formal structure in order to reduce the risk of being held personally liable.
Certain business structures, such as a limited liability company (LLC) or a corporation, provide basic protections for a business owner’s personal assets. Many Georgia small business owners prefer to form an LLC since it is not as expensive or complicated as a corporation is. Certain tax benefits are also available to an LLC, as opposed to a general partnership or sole proprietorship. Fewer paperwork requirements also make this a particularly attractive type of business.
The paperwork requirements are still important, however. Even though there is as much paperwork is necessary or as many regulations to be followed when compared to a corporation, every state — including Georgia — requires certain procedures and formalities to be followed during business formation. They must also be maintained as the business develops in order for the LLC to remain active and to keep those personal protections in place. Knowledge of those requirements could potentially mean the difference between successfully limiting the personal liability of an owner and potentially losing everything if one of those worst-case scenarios happens.
Source: entrepreneur.com, Does Your Business Put You at Risk of Lawsuits?, Nellie Akalp, March 28, 2014