The third business model we discussed was the LLC, Limited Liability Company. It is the preferred business model for most small businesses.
An LLC runs differently than the sole proprietorship or partnership. An LLC is set up to run on its own accord; it is considered its own separate entity. Therefore, a person applies for loans and grants, not in their name, but in the name of the business. Also, with an LLC, one can sell business memberships for extra revenue, and the members are not required to be actively involved with the business, unlike the two business models previously discussed. Memberships are allowed, but the business cannot be publicly traded.
The best thing about an LLC is that an individual cannot be held directly liable for the company. If the company is sued, the individual’s personal assets are safe……provided the LLC is being run properly. This means that the company’s money and an individual’s money must be kept separate at all times. If one spends personal money on the LLC, he needs to write an expense report and reimburse himself. If a suing entity discovers that the line between the business and the individual is “fuzzy”…exchanges were made from one to the other without the proper paper trail, for all intents and purposes, the LLC is in title only and the individuals who own it are financially liable as well. Also, with an LLC, it is important to have an operating agreement on file so everyone knows exactly how the business is being run.
In the state of Idaho, one can file for an LLC through the Secretary of State’s office, and the cost is $100.