You mentioned in "LLCs For Dummies" that you are against single member LLCs and suggest getting a friend to be a member with a small share. You do not mention family members as additional LLC members to get around the liability hole. Please explain.
MyLLC.com literally write the book on "LLC's For Dummies" and has long been considered the leading authority in providing information regarding forming LLC's as well as other types of business entities and assisting individuals in achieving their goals of forming their own companies. We are often asked about single-member LLC's and whether adding family members or spouses changes your status. While we strongly suggest addressing any questions you have regarding your business with your tax adviser, the following information provides our general thoughts on the subject.
LLC's offer your business multiple levels of protection while guarding your personal assets from lawsuits as well as IRS fines and penalties. There are a host of reasons why forming an LLC is a smart business move as well as being one of the best ways to protect the business you are working so hard to build. However, should you choose to operate as a single-member LLC or sole proprietorship, you are leaving yourself totally vulnerable. It is because of this lack of protection that MyLLC.com strongly advises that you consult your tax adviser before making any decisions regarding your business and your filing status.
MyLLC.com is often asked if adding a spouse or family member as opposed to actual business partners is a way around forming a traditional LLC. These are dangerous waters to tread. The IRS as well as the courts considers your spouse as one member and not an additional partner. However, you can select a relative or even a child as a partner without creating any issues. Partners are not required to ACTIVELY manage the LLC and you can maintain total control by setting up your LLC to be manager-managed and select yourself as the sole manager. This provides you then with the protection an LLC offers while still allowing you to maintain complete control of your business.
MyLLC.com has highly experienced experts standing by to assist you should you decide to change your filing status from a sole-proprietorship to an LLC. Contact us today to get started!
