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I started a LLC – Now What?

EQUES Law Group > Business Law  > I started a LLC – Now What?

I started a LLC – Now What?

Limited Liability Corporations, or “LLC’s” have become a top business choice for entrepreneurs, real estate investors, and small business owners. They are simple to set up and relatively straightforward to run. Ohio has seen a great increase in businesses being set up in recent years, particularly LLCs. As of March 17th, over 31,000 new businesses were created in 2022 thus far (see this article from the Ohio Secretary of State). Our office regularly assists those interested in setting up an LLC of their own. Other than the obvious use of using an LLC to run a business, LLC’s are also popular holding companies for real estate or mineral rights, and can even be useful for estate planning in certain situations. 

However, I caution my clients that filing a simple form on the Secretary of State’s website to create the LLC is not enough. In order to truly have the liability protection of a limited liability corporation, the business has to be treated as just that – a business. One of the most important pieces to this puzzle is an operating agreement, which will explain who the members of an LLC are and their membership interests, explain how meetings are to be called (even a single member LLC should have meetings to designate actions) and explain how members can be added or removed, among other things. 

You also want to make sure that any property that is to be part of the LLC is actually owned by the LLC. Titled property should be titled in the name of the LLC. Property that doesn’t have titles (such as machinery, tools, animals), should be purchased from the LLC’s finances, using an LLC credit card, check from an LLC banking account, or the like, and you should keep a good paper trail of such purchases. 

One of the benefits of an LLC is that you can transfer your interests upon death to an individual or a Trust so that the LLC ownership interest does not have to be probated. However, if property is not actually owned by the LLC in title, but is found to be owned by you personally, that property will have to pass under your Will and be distributed by opening a probate estate. 

With purchasing in mind, clearly, you will need a bank account, and you should obtain an Employer Identification Number for that. If you’re making sales in Ohio, you will also need to obtain a vendor’s license and register with the Ohio Business Gateway. If the LLC will have employees, Ohio Business Gateway is a good starting point, as well. The LLC should then create an Employee Handbook. 

With single-member LLCs especially, I want to stress the importance of keeping personal and business funds apart. Commingling of assets will pierce the corporate veil; that is, make your personal assets at risk in an action against your LLC. If you are paying yourself from an LLC, again, make a paper trail. Write yourself checks as distributions to members – do not just transfer funds from your LLC accounts to pay your personal finances or checks, or to your personal account. 

This is just a quick summary of some issues that you should consider. I encourage you to speak to legal counsel if you are considering starting an LLC, or already have started one and have not spoken to an attorney, to make sure you are set up in a way to fully achieve the benefits of an LLC. They are a powerful tool if used correctly. Don’t let simplicity fool you into complacency. An LLC is a simple business structure, but it is still a legal entity and should be treated as such.

 

Moriah Hinton

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