The scope of an LLC
When forming a new business there’s a lot to think about. Incorporation, setting up your website, finding customers and making payroll. Many owners file their LLC incorporation paperwork and get right to work, assuming that the two ‘L’s are covering their legal bases.
That would actually make sense at face value. Limited Liability sounds like it would provide some level of legal protection to the business and its owner(s.) So what does an LLC really cover, and should you be using a service agreement, contract or other protection document as you engage clients, partners or employees?
An LLC at its core is an entity that is recognized by the government separately from its owners or managers. An LLC can purchase and own property, or enter into contracts. The major benefit of an LLC is to provide investors protection against losing more money than they invest into the organization. Especially LLC’s who maintain an Operating Agreement, clearly outlining financial and management responsibilities. Therefore, if a business were to take debt that resulted in the need to file bankruptcy, the LLC could declare corporate bankruptcy shielding the owners from some financial consequence.
Everyday business operations, work for clients, and partnerships however do not fall into the overall scope of an LLC. Which is why it is important to establish agreements or contracts with those who you do business with. The following agreements are important to have and establish as your business grows, to protect yourself, your investors and employees.