So, how do you protect your personal finances and assets from any potential legal issues that may arise while you are operating your business? This is a reality that every business owner needs to take into consideration.

So before you even start to think that there is no way that your little business could do any harm to anyone else, ask yourself these questions.

- Do you have customers or clients that enter your place of business?

- What if one slips and falls in your business?

- Maybe you provide computer code that a client will use in their business?

- What if one of your programmers makes a mistake in the code that allows a successful ransomware attack on your customer?

Now all of that sounds really scary, but there is an answer, and it isn’t complicated or hard.

The answer is a Limited Liability Company.

There are multiple benefits to establishing an LLC for your new business. The most important is right in the name…‘Limited Liability’.

By establishing yourself as an LLC, you legally separate your business from yourself, and in this manner, your personal assets and finances are protected from any business-related litigation.

If you are considering a partnership, you need to stop and take a hard look at going the LLC route instead. General partnerships provide no liability protection and actually expand the liability to all partners. If one partner is sued, all partners are liable.

In some states and some regulated professions you can establish a limited liability partnership that can provide a certain level of protection.

In my experience, an LLC is the perfect structure for a partnership. The first step in setting up an LLC is to create the articles of organization which effectively is your member operating agreement. In an LLC a member is an owner. In this, you will define how the business is run, including all management aspects of the company.

At this point, you’ll need to make a decision as to whether your LLC will be member managed or manager managed. With the member or owner managed option, all members manage the business functioning like a board of directors. Alternatively, in a manager managed LLC, you can designate one of the members as the manager of the LLC or even have someone who is not a member or owner can be designated as the manager. Obviously, if a single individual is designated the manager, then that individual will make the day-to-day decisions for the company.

This agreement is where you establish not only how the company is run, but how profits are distributed and how members are added or removed from the organization and even how the LLC is sold or dissolved. There is literally no limit to what can be addressed in your articles of organization. In some high risk situations it might even be prudent for each member to be its own LLC and that LLC is then the listed member of the new LLC. Another level of liability protection.

So when you create your articles of organization be as creative and detailed as possible in defining all member activity within your LLC. Protect your interest in the LLC. Once you have it ready to file, find an attorney to review. Find an attorney focused on small business, someone who understands small business and small business entrepreneurs.

When you’re ready, file the articles of organization for your LLC with the Secretary of State. These filing documents may be called a “certificate of formation” or a “certificate of organization” depending on the state you are filing in. Your state’s corporate filing office, usually the Secretary of State, can provide the appropriate forms for filing.

Again, you can do this yourself, just be careful and get legal advice if you have questions.