Today’s economy is shaky, to say the least. With many worldwide problems, it can be an extremely scary proposition to start a business. One of the biggest concerns, financially, when starting a business is the liability involved. Covering the business for any potential lawsuits can be the stopping point for many entrepreneurs. That is why more people are creating their businesses based on the structure of a limited liability company definition. Using a limited liability company definition will help protect the investors from being financially responsible for anything over their initial investment. Zen Business
The limited liability company definition states that any investor in a company is not liable for financial responsibility beyond that of the money the investor first puts into the company. In other words, if an investor puts a stake of 100 thousand dollars into a limited liability company, and the company gets sued for an amount of 500 thousand dollars, the investor is only responsible for 100 thousand of the lawsuit. This makes investing into an LLC much more attractive than some of the alternatives. In fact, LLCs offer the chance to take slightly more risk on a product that may be untested or untried in the market, since the potential downsides are reduced.
By the limited liability company definition however, the investors are not immune from litigation. In fact, a company can be brought to trial for loan defaults, injuries, breach of contract, or any of several other types of legal actions. The financial liability may be limited, but the lawsuit can still name the partners in the LLC as the responsible parties. Even though the partners may not have to pay anything out of their own pockets, the legal implications can still be as far reaching as those for any other company. Ironically, many in the business world view this type of culpability more severe than they would with the same lawsuit involving a fully formed company, since it can be implied that the investors tried to hide behind the LLC financially.
From an investor’s viewpoint, another attractive feature of the limited liability company definition is that normal operating procedures from a business point of view can be hidden. For example, the minutes of meetings do not have to be made publicly available. This allows the partners to discuss things involving the company in much less rigorous settings. For example, two friends eating dinner can spontaneously make company policy. Many people feel that this leads to a much more streamlined way of running a company, since there is so much less red tape to go through.
The limited liability company definition has taken a lot of the stress and strain off of forming a new company in today’s economy. With the prospect of reduced financial responsibility, securing investments in a company can be much easier to accomplish. Knowing that there are still risks involved however, allows an LLC to be on equal footing with other companies in the market. By using the limited liability company definition, many people in business believe the company can be considered and run much more efficiently. When deciding to start a new business, it may be worthwhile to check into the option of forming an LLC.