Wednesday, March 6, 2013

Should I Form an LLC if I Sell Goods Over the Internet?

Who Should Consider Forming an LLC?

It is common business practice for small business owners to form an LLC (limited liability company) to separate their personal finances from their business finances and to create an additional layer of protection for their personal assets. A less common but similarly prudent practice is for anyone anticipating selling goods over the internet to create an LLC as well.

For a while now, business owners in higher-risk ventures have created LLCs, such as real estate investors and entrepreneurs.  These business owners use the LLC entity structure in hopes to protect  their personal assets in the event their company gets faced with a lawsuit.  The same legal reasoning could apply to anyone desiring to use the internet to sell their products.  That is, anytime goods are sold over the internet and money exchanges hands, those goods can get damaged and the buyers may sue the individuals who sold them those goods.  An individual selling these goods over the internet may mitigate some risk by forming an LLC.

Where Can I Find an Attorney to Set Up My LLC?

Every state in the United States has different laws regarding LLC formation and operation.  Because of this, an individual seeking to form an LLC would be better off meeting with an attorney who is experienced with entity formation law and is licensed in the state where LLC is being formed.  See "LLC Utah Lawyer".  The good thing is that small business attorney firms may offer free initial consultations.  

If an individual who sells goods over the internet already has an existing relationship with an attorney and feels that the attorneys' work is satisfactory and that the legal fees are reasonable, then that individual may consider expanding the legal services offered by that attorney.  The attorney may refer another the individual to another competent attorney.  If the individual does not have an existing lawyer relationship, the individual can ask fellow business-minded friends for their attorney references.

Is It Expensive to Form an LLC?

If an individual selling goods over the internet concludes that it may be prudent to form an LLC, the question arises whether it is cost-prohibitive to form the LLC.  Since each individual sells different goods over the internet for different reasons and through different venues, it may be wise to have a lawyer customize the operating agreement for the specific needs of the LLC.  But understand such customization will increase the legal fees for the LLC.  The individual may find, however, that a few thousand dollars invested into an LLC is money well spent and may help the individual save money in the future.

Jeff Butler, Utah Lawyer

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