Mark G. Clark Business Formation Law Blog on Lawyers.com

Attorney Mark Clark discusses business formation concerns for internet entrepreneurs in this interview on Traverse Legal Radio titled Corporate Formation Issues For Internet Entrepreneurs.

Traverse Legal Radio
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With expert: Attorney Mark G. Clark

Show sponsor: Traverse Legal, Corporate Lawyers

Transcript excerpts below.. (Read entire interview transcript here)

DAMIEN: Well, we're talking about LLCs. What is a Limited Liability Company, Mark?

MARK: Well, Damien, a Limited Liability Company or what is more commonly referred to out in the public as an LLC is a business entity. Similar to a corporation or sole proprietorship or a partnership, but it has some features that may be more beneficial. As the name suggests it is a limited liability company. What that means is that you can create for your business this type of a business entity and limit yourself from liability. Really there are two types of liability that people who own and/or form businesses are concerned with. Those are protecting themselves from liabilities such as a casualty liability where for instance in the course of your business you cause or create a car accident and you have inadequate insurance. What you've done then is you've created a business entity to take the liability exposure from that event. The more common reason that people would want to form a limited liability company or LLC is to protect themselves from business debt. If for whatever reason the business is not doing well, or ultimately fails for instance, the individual is protected from paying the company's debts and obligations in the event of a business failure.

DAMIEN: What are some other reasons that someone would want to create a limited liability company?

MARK: The most common candidate for a limited liability company is a small business or a family business. It used to be, Damien, more than ten years ago...there was really only one option for forming a business entity to protect yourself from liability and that was the corporation. Now the corporation is a little bit more complex. It involves the issuance of shares of stock and the creation of boards of directors and officers and it was very cumbersome or difficult for the small business owner or the family owned business to operate in that type of a business structure. Now the limited liability company has been around for more than ten years, but about ten years ago or so the IRS came down with a revenue ruling which made it clear that this more informal type of organization was going to receive the same type of beneficial tax treatment that an S corporation had. And that is that income that you generate will flow thru to you individually and not be taxed twice. A limited liability company is less formal than a corporation. It operates more like a partnership and a limited liability company is created and formed by essentially creating a document that is much like a partnership agreement. It is very flexible and it can be created to suit the individual business owner’s needs. You're not stuck with what the laws used to provide for which was essentially a corporate form of business entity.