Follow These Easy Steps to Protect Your Own Business

If you have a small business, you might not have considered the importance of establishing an official legal entity for your company. This is especially true for sole proprietors who are beginning entrepreneurs. When working with clients, however, you are placing yourself at risk for a lawsuit—and if your company isn’t registered as its own entity, your personal assets could be seized to pay for business debts or legal judgments. Take these steps to protect yourself and your business.

Create a Limited Liability Company

A limited liability company (LLC) provides a legal shield for your personal assets. With this type of business entity, your personal assets cannot be seized to pay for business obligations. Your personal liability is limited to the amount you have invested in the company. LLC formation is governed at the state level and can often be completed online. Fees and requirements vary by state. While an LLC is the most popular small business entity, you may also choose to form a corporation to enjoy limited liability along with specific tax advantages.

Obtain an Employer Identification Number

If you mix your personal and business assets after forming an LLC, you put your limited liability at risk. Obtaining an employer identification number, or EIN, identifies your business to the IRS for tax purposes. You can also use this number to apply for business bank accounts and lines of credit so that you maintain separate accounts for company funds. You can apply for an EIN online or by phone, fax, or mail; no charge is associated with this service.

If you want to learn more about protecting yourself as a small business owner, Gov Doc Filing can help. We provide the forms and resources you need to ensure that your business is compliant with legal and tax obligations, so that you can focus on your core products and services.