By Kirsten Adshead/motherbility
Forming an LLC won’t precisely save your life.
But if 15 minutes and $130 now keeps you from losing all your money, your house and your assets later, it’ll sure feel like it did.
An LLC (Limited Liability Company) keeps people from being able to go after your personal property if they’re somehow harmed by your business.
Say, for example, someone chokes on a product you sold them. Or they come to you for a guitar lesson, trip and break their leg.
If you have an LLC and they sue, they can only go after the LLC’s assets. If you don’t have an LLC, they can sue you for everything you own.
(You may still be liable, even with an LLC, if you’re personally negligent, reckless or commit fraud. So … don’t do that.)
Forming an LLC protects your personal assets if the company goes bankrupt.
And with an LLC, you don’t have to file a separate tax return for your business. Just get a Schedule C form and report your income or losses and expenses as part of your personal tax filings.
Seriously, you want to form an LLC.
“It’s a little bit of an investment, but then you’re set,” said Anne Smith, co-founder and director of the Law & Entrepreneurship Clinic at the University of Wisconsin Law School. “It’s the most flexible. It doesn’t require you to have a board of directors. It doesn’t require that you have regular meetings. It’s the most flexible kind of entity that you can form.” *
You can form an LLC now and convert your business to a different type of entity later on, such as an S corp or C corp.
But, Smith noted, “Most small business owners are good with an LLC.”
To form an LLC in Wisconsin, here’s all you have to do:
Go on to the Department of Financial Institution’s website, hover over the “Corporations” tab near the top of the page and click on “Create an LLC or Corporation.” Then choose “Domestic Limited Liability Company-Wisconsin.”
That brings up an instructions page. Some of the terminology may be new to you. But the website helpfully includes links that explain anything that might be confusing.
Choose “Click here to start filing,” at the bottom of the page and then just fill in the blanks. You’ll need to name your LLC, give your name and address, etc. It’s all basic information.
Pay the $130 fee at the end and … you’re done. DFI will have to approve your request. There’s a $25 annual renewal fee. But essentially that’s it.
It’s near-instant protection for your personal finances.
*As your business grows in complexity and income, other entities might more suitable — for example, if you’re seeking investors or want to operate internationally. Also, if you have a business partner, there are other considerations. Motherbility will explore more options and issues in subsequent articles.