The key to limiting liability exposure is to realize where your company might be vulnerable. It is important to be able to recognize possible situations that make a company vulnerable. Knowing all possible significant aspects of any liability associated to the type of business an owner wants to participate in is vital. A business owner should always understand and have working knowledge of all laws that apply to your business to prevent liabilities. Personal Business Venture
My future personal business venture would a clothing line for curvy women. As a curvy woman, it is very difficult to find non-geometric, non-tent like, flower patterned, ugly business and casual clothing. The best business organizational form for this business would be an LLC. LLC’s are easy to set up. Chose a business name that incorporates LLC, file an article of organization, create an operating agreement, obtain licenses and permits, hire employees, and finally open the doors.
I would have variety of partners from textiles, designers, clothing producers, managers, and finally marketing specialists. The personal liability exposure would be minimal. With an LLC if I messed up the partners would not be responsible. The consequences are not as bad is if I was in a corporation. The LLC is more flexible. The positives are less record keeping and more profit sharing. The state would have some say into my company so I would have to keep up with guidance regularly.
The negative of this company is that once a member leaves, the entire company must complete their duties and responsibilities and then dissolve. Another down fall is that self-employment tax contributions towards Medicare and Social Security. “The net income of the LLC is subject to this tax. The federal government does not recognize LLC as a business entity for taxation purposes, all LLCs must file as a corporation, partnership, or sole proprietorship tax return. Certain LLCs are automatically classified and taxed as a corporation by federal tax law. ”