Let’s cut to the chase this time. The number one mistake that single-member LLCs make is…are you ready?
In a nutshell, it’s acting as if you aren’t operating a business. Yup, downplaying what you truly have. Thinking you can just file a form with the state and start an LLC and BOOM! You’re good to go.
Nope! Sorry, that’s wrong.
Okay, so what’s right?
Why This Mistake Is So Huge
The primary benefit of an LLC is that it protects you, the individual, from the liability and debts of the LLC. For example, if the LLC is sued and it has some damages assessed against it, those are the LLC’s liabilities and not personally yours. Well, essentially that’s the idea.
This liability protection doesn’t just come from filling some form and paying a little bit of money. You have to actually do things to uphold that protection. Think about it: do you truly believe that just filing a form with the Secretary of State and paying a couple of filing fees is going to automatically give you personal liability protection? Unfortunately, it won’t. People tend to think if it’s not “legally required,” then we don’t have to worry about it.
Most (if not all) states have statutes that say something along the lines of, “an LLC may have an operating agreement.” Emphasis on “may.” The statute doesn’t state it is a legal requirement to run your LLC, only that it permits it. Most states are very permissive when it comes to how an LLC operates.
Though just because something isn’t required doesn’t mean you shouldn’t do it. What would be the purpose of starting an LLC if you aren’t going to take the steps to uphold and strengthen it?
Tune in to this week’s episode of All Up In Yo’ Business to find out how to avoid making this mistake. And be sure to subscribe to our YouTube channel for more All Up In Yo’ Business!
Want more information on business? Check out: How To Start An Online Business.