Up until recently there were only two extremes for how to run your business, as a Sole Proprietorship on one end and a Corporation on the other. A sole proprietorship is just you operating your business as yourself. It’s convenient and easy. You are not having to file anything but there is no legal protection. If your business gets sued, you get sued. For that reason, it’s typically the worst way you can operate your business.

On the other extreme side is as a Corporation. A corporation is a separate entity from you which provides protection. It has a lot of formal requirements and has been used for hundreds of years but it is very stringent and there are a lot of hoops to jump through.

Fortunately, there’s now a middle option between the two extremes and that is a Limited Liability Company (LLC). They take the convenience of a sole proprietorship and the strong protection of a Corporation. Most companies these days are formed as LLCs. Once you form your LLC you are putting the business assets in the LLC and you are keeping your personal assets such as bank accounts and your house in your personal name. If you personally get sued your company is safe, if your company gets sued your personal assets are safe. The key is keeping them separate.

An LLC is like a castle. You have your Articles of Formation which are your concrete Foundation. You have your Operating Agreements, your Organization Minutes, and your corporate documents showing that your LLC is operating separately from you as your Walls of Protection. You have your business assets titled in the name of the business such as vehicles and real estate, aka your treasure, inside your castle. And you have insurance policies which are the archers on your Walls defending your LLC if you get attacked, aka sued.