Choosing a business structure is one of the most important decisions you have to make because it can affect your company and your personal life. One thing that people don't realize is that if you start a company as a sole proprietorship, disgruntled people can come after your personal assets. For this reason, many people opt to use a limited liability company (LLC) as their business structure.
When you register a company as an LLC, you are separating your personal assets from the business. This means that if someone sues the company for breach of contract or something similar, they can't touch your personal property. You must ensure that you keep everything for the business away from your personal assets, which means you need a bank account for each. You can't use personal funds to pay business expenses or vice versa.
Note, however, that if you defraud customers or investors and use the LLC as a vessel for doing that, you could open yourself up for some personal liability. You also have to ensure that you meet the requirements for having an LLC, such as holding an annual meeting.
While it is fairly simple to start an LLC, you must ensure that there aren't any other business structures that might be better options for you. By making sure that you understand each choice that you have, you can make the decision based on what is best for your business and your personal holdings. If your business is sued, it's essential to consult your attorney right away for guidance and support.