Why Your Family-Owned Business Should Form a Limited Liability Company (LLC)
There are some things in life that just take precedence. For many Berks County locals, family falls at the top of the list. Protecting what belongs to your team is an essential aspect of taking care of the family. However, it's also a way to help your family-owned business thrive for years to come (ultimately allowing you to give back to the community at large).
By having your family-owned business form a Limited Liability Company (LLC), you're taking the right steps toward securing a lasting business experience. And for that, your family will always be grateful.
What's a Family-Owned Business?
So how do you know if your corporation falls under the family-owned business tag? A family-owned business is one that's owned by family members. This can be an exclusive familial leadership or one that's comprised of mostly family members.
Not all of these corporations run the same way. Some fall under an owner-operator model, which ensures that a family has both ownership and managerial control of their business. You can also adhere to a majority shareholder idea, which limits the number of available non-family shares. Whatever your setup, having control over the business, and if applicable, the board of directors, is a wise choice—this keeps your family in the loop for every major decision.
Berks County, Pennsylvania is teeming with family-owned businesses. In fact, there's even a little something called the Berks Family Business Alliance, which falls under the Greater Reading Chamber Alliance. In a region like this, family-owned businesses are taken seriously, and yours is no different.
The Pros of Forming an LLC
An LLC, more formally known as a limited liability company, is a business structure with similarities to a corporation and a partnership. Closed off to outsiders, an LLC is usually controlled by a few tight-knit individuals who hold membership interest therein. Unlike corporations which issue shares of stock, an LLC offers membership interest which can vary depending on the internal structure of the business and its operating agreement. As a family-owned business, forming an LLC holds a range of benefits for you and your kin. Below you can find some of those benefits:
Protect Family Assets Against Creditor Claims and Other Liabilities
An LLC grants asset protection for your family-owned business. If a creditor tries to reach for your possessions via charging order, you'll have an automatic shield called the corporate vail. It gives you a firm footing come negotiation time, and even allows you to settle any dispute without court interference. In laymen terms, when you form an LLC and if that business is sued the moving party can only go after the assets within your business and not those owned personally by you and your family, like your home or your personal bank account.
Help with Estate Planning
Estate planning is one of the biggest benefits of an LLC. Being a part of a family-owned business can mean lower appraisal values and discounted property taxes. You can use your membership to pass down assets to heirs and outside parties if desired, all without delegating too much control away from those who need it most.
As far as what assets can become part of an LLC, the options are endless.
Sharing income between generations and reaping the benefits of gift tax discounts are just a couple more ways that forming an LLC benefits your family-owned business. With all the upsides that come with LLC formation, you may just wonder what's been keeping you from such a solid move all this time. For the sake of your family and the benefit of your business, going the LLC route is a no-brainer.
If you want to be specific about what's going down in your LLC, you may be interested in an LLC operating agreement. This legal document states the rights and responsibilities for every member of the LLC, and clarifies just how to run things from the inside out.
Here at the Law Office of Nikolas D. Capitano, Esquire., The Leges Group LLC, we always encourage our clients to consider investing into an operating agreement at the start of their business. While operating agreements are not required by Pennsylvania law, and may not be necessary if your LLC is owned by one individual, when the time comes to add members or divide up ownership among your family members and operating agreement is next to mandatory. Think of it as the instruction booklet to your business. It tells everyone how to play nice and fair.
Consulting a Business Law Attorney Will Keep Your Journey to LLC Smooth
There are a few steps to take in order to get moving toward a family-owned business that's LLC legit. While doing so on your own is possible, enlisting the help of a business law attorney ensures a proper process and a seamless outcome. When doing business with your loved ones, this kind of ease can make all the difference in your family's harmony, happiness and success.
Find a Business Law Attorney That Does the Family LLC Thing Right
One thing worth noting, not all business law attorneys are created equal, especially when it comes to setting up a family LLC. If you decide to work with The Leges Group, you’ll be working directly with our owner and managing attorney, Nikolas D. Capitano, and here are a few steps that we he will take to propel that LLC of yours forward:
We'll have a preliminary conversation with you about your business, collecting all the necessary details.
Then, we'll schedule you for a one-hour in-person meeting. During this time, we'll have a deeper conversation about your business and goals.
Based on the above, we'll discuss the various considerations you should think about when it comes to starting a business and forming an LLC. This includes: The protections the LLC will offer you; How to manage your business finances; Logistics of your business; Licensing and partnership considerations; Tax considerations; and Whether or not an LLC is best for your goals.
Now, it's time to develop a game plan for how I can help you, whether it be forming an LLC, implementing an operating agreement or obtaining an EIN number.
If you decide to hire The Leges Group, we'll enter into an Agreement of Representation. Once we've formed an attorney-client relationship, we will get to work.
We will then request from you any necessary background information and legal documents already in use (exactly what information will be needed depends on what we will be doing for you).
Forming an LLC in Berks County, Pennsylvania can take up to two weeks or so. An EIN is obtained instantly on filing, but an LLC takes about a week to become active with the state depending on the volume of filings. If you also want an operating agreement, that can take a maximum of 3 weeks to complete, depending on the degree of detail and complexity involved therein but you can rest assured that you will be involved throughout the process from start to end.
Berks County Businesses, It's Time to Keep It in the Family
Whatever kind of family-owned business you run, knowing that you have the security of an LLC at your back is a good feeling. From mom-and-pop shops to hearty corporations that started from the bottom, it's a way to give back to the ones you love most while ensuring the success of the entire family.
From us at The Leges Group LLC, we couldn't think of a better way to keep it all in the family, so give us a call today at 610-228-2828 or contact us via our website at www.thelegesgroup.com.