Forming an LLC protects you by shielding your personal assets from the assets and operations of your business.
Without forming an LLC, you and your business are one and the same. Meaning, if your business gets sued, your personal assets can be seized in order to pay for damages and other court and legal fees.
Personal assets are anything that you own in your name. This means your checking account, savings account, retirement and investment accounts, house, cars, vehicles, boats, machines, jewelry, collectibles, firearms, and anything else that has substantial value.
When you form an LLC you create this wall of protection between your personal assets and your business. An LLC is a separate legal entity, meaning it is legally separate from you as an individual person.
So instead of you operating the business as yourself, after you form the LLC, it is the LLC that your customers and clients are doing business with. You are simply an agent or a “representative” of the LLC.
Further, you can position yourself (as owner of the LLC) any way you’d like. You can use the title Founder, CEO, President, Member, Owner, or anything else that you’d like.
Besides an LLC protecting your personal assets, an LLC can also help make your business more credible in the eyes of customers, clients, vendors, and other business contacts.
2 comments on “How does forming an LLC protect me?”
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Do I need LLC for online music business ?Selling beats.And is LLC like registering a business with Ohio business bureau at the same time or ?
Forming an LLC in Ohio registers that business with the Ohio Secretary of State (I’m not sure what the Ohio Business Bureau is). You’re not required to form an LLC for your business. It’s a choice. You can operate as a Sole Proprietorship if you’d like. Just know that a Sole Proprietorship doesn’t offer personal liability protection like an LLC does. We have an article on LLC vs Sole Proprietorship if that’s helpful. Also keep in mind that Ohio LLC’s are $99 to form and don’t have Annual Reports (like most other states). Said another way, Ohio LLCs are pretty awesome and quite affordable.