“It has been my experience that being pro-active, and not reactive, in protecting yourself, your business, your assets, and your family’s assets is of the highest concern.”
Today we are so lucky to have a guest post from our friend and lawyer, Alex Bigger, JD. He graciously wrote this guest post to help pharmapreneurs to understand exactly what, why and how you should LLC your small business. It is important for pharmacists to understand the legal issues surrounding contracting for clinical services and to protect themselves and their personal assets.
Bigger attended law school at the Mississippi College School of Law in Jackson, Mississippi, and in 2012 he received his J.D., cum laude, along with several honors and awards. While in law school, Alex served as a member of the law review and was a teaching assistant and student mentor for new law students. During his final year of law school, he became certified under Arkansas Rule 15 for Student Practice and clerked at the Craighead County Prosecutor’s Office in Jonesboro. Alex is licensed to practice law in Arkansas and is a member of the Arkansas Bar Association. He currently serves as the elected City Attorney for Pocahontas, Arkansas, as the appointed City Attorney for Corning, Arkansas, and as General Counsel for the Clay County Electric Cooperative Corporation. He is also the president of the Randolph / Lawrence County Bar Association.
Today he shares with us some considerations that we should take in order to protect our personal assets.
For a professional provider, like a lawyer or pharmacist, why is an LLC useful?
Of the various types of corporate structures, the Limited Liability Company (LLC) is often viewed as the most flexible type of formal business structure, or entity. In Arkansas, as similar to other states, with the filing an Articles of Organization with the Secretary of State and after a few other procedural formalities and elections, an individual can form a limited liability company. In this writer’s opinion, it is one the first steps an individual should take in the forging of business credibility and strategy.
The two immediate and most crucial takeaways are the limited liability status that is offered by forming an LLC which in turn offers asset protection and personal liability protection.
An LLC will provide what is termed limited liability protection to its owners and members. Limited liability is protection from any action taken or failure to act on behalf of the limited liability company unless the act or omission constitutes gross negligence or willful misconduct. This means that the personal assets of the owner or member are not exposed to the debts and liabilities obligated by the LLC (unless otherwise personally guaranteed by the respective owner or member).
In other words, a creditor may not successfully pursue the personal assets of the owner to pay the business debts of the LLC. This is in contrast to a sole proprietorship or partnership where an owner’s assets would be vulnerable and potentially subject to the same liabilities and claims asserted against the owner’s business.
Without a corporate structure such as an LLC, a business owner is unable to avail themselves of the limited liability afforded to a lawfully organized limited liability company.
What are the differences in the types of LLCs?
The LLC offers flexible membership and management structures. Arkansas law recognizes the formation of “member managed” and “manager managed” LLCs. An LLC organized in Arkansas is member managed by default, which means that the collective membership of the LLC manages the business affairs and may each individually bind the LLC to contractual agreements.
If this type of management structure is not preferred by the incorporator of an LLC, an incorporator may alternatively elect to use a manager-managed LLC. In a manager-managed LLC, the members may delegate management responsibility and authority to a single member or a group of members, or even a non-member if the collective membership makes this preference.
Among other important decisions, determining which management structure to use for a particular LLC is one of the predominant reasons for retaining a trusted legal adviser for the creation of an LLC.
Why should you use a lawyer experienced in corporate structure instead of “DIY”?
An individual unfamiliar with the law would be better to be well advised by a professional attorney to set up an LLC. While LLC formation can be done by the individual person, a person not trained in the law may not be aware of issues or the effect of crucial decisions that are made in the formation process; further, the individual may not likely be aware of the various election options or how to conduct business in such a way that does not subject their assets to personal liability.
In closing, the business environment is increasingly becoming more competitive, no matter the field of practice.
It has been my experience that being pro-active, and not reactive, in protecting yourself, your business, your assets, and your family’s assets is of the highest concern. Formation of an LLC is, in my opinion, the first crucial step to creating a legitimate small business for an aspiring entrepreneur.
- LLC formation protects your personal assets
- Trust an expert to create the LLC
- Not understanding the intricacies of the formation process can leave you unprotected
- The first step to creating a business is protecting yourself through a business entity such as an LLC
This writing is not meant to be exhaustive in terms of the intricate details and elections of forming a LLC. Consulting with an attorney who is knowledgeable in this field would be the best practice.
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