Strategic Investments: How Business School Knowledge Can Help You Form a Successful LLC
Publish Date:Completing a business degree can provide you with a vast portfolio of skills and core competencies, all of them directly translatable to business ownership. These skills can include everything from basic financial acumen to sophisticated sales skills, not to mention an affinity for managing employees and connecting with clients.
And that’s to say nothing of the particulars of structuring your business. By completing a business school program, aspiring entrepreneurs may learn much about the different legal models available, along with pros and cons for each. More to the point, business school students may acquire a number of skills that can directly inform their approach to LLC formation.
A Crash Course in LLCs
For those who aren’t as steeped in the legalities of business ownership, let’s take a step back: What is an LLC?
LLC stands for Limited Liability Company. First created in the 1970s, the LLC has become one of the most popular legal frameworks for entrepreneurs across the country.
Here’s what sets an LLC apart: When you establish your company as an LLC, you’re truly creating a whole new business entity. In other words, the LLC is its own thing, apart from its owner. This isn’t the case with, say, a Sole Proprietorship, where the business and business owner are effectively one and the same.
This opens up a whole host of benefits, foremost among them the fact that an LLC will keep your personal assets distinct from your Business Process Outsourcing. Ditto your personal and business liabilities. This allows for significant personal wealth protection, specifically protection against creditors and lawsuits.
At the same time, an LLC offers benefits over the Corporation. Corporations are much more regulated and regimented, with strict demands about financial reporting and stakeholder meetings (among other things). By comparison, the regulatory burdens that LLCs face are very minor indeed.
As such, many entrepreneurs find that the LLC hits a sweet spot, offering better protection than a Sole Proprietorship, greater ease of administration than a Corporation.
How to Register an LLC
So what should business school students keep in mind as they consider registering an LLC? The requirements may vary by state, but here’s a general outline.
1) Select a business name.
First and foremost, every LLC needs a name… and it has to be a name that isn’t currently in use by another LLC in the same state.
2) Choose a Registered Agent.
LLCs are required to have Registered Agents, individuals or institutions who receive tax and legal documents on the company’s behalf. It’s typical to hire a third-party service (often under $100 annually), though some states do allow entrepreneurs to serve as their own Registered Agents.
3) Create an Operating Agreement.
An Operating Agreement is essentially like a charter for the business, outlining how the partners will split managerial duties as well as profits. You don’t actually have to have an Operating Agreement, legally speaking, but it can spare you from potential disputes down the road.
4) File your paperwork.
As any B-school student will surely anticipate, creating a new legal entity means filing some paperwork. In this case, that means Articles of Organization, along with a state-specific LLC fee. You’ll also need to keep up with LLC annual fees to keep your registration active. (Don’t worry: In most states, the fee is between $15 and $300.)
5) Get your finances in order.
In addition to an Employer Identification Number (EIN), you’ll also need to set up a business bank account that isn’t connected to any of your personal savings or checking accounts.
Essential Skills from Business School
While it’s easy enough to follow these basic steps, completing formal business training can impart the kinds of strategic skills that make LLCs all the more successful. Here are just a few examples of business school skills that are essential in the LLC setting.
Risk Awareness
Any time you launch a business, you’re opening yourself up to risk… but how much risk can you tolerate? And what are some of the best ways to diffuse that risk? Business school training can provide the sharpened instincts and general risk awareness needed to take full advantage of the LLC format.
Collaboration & Delegation
When you create the Operating Agreement for your LLC, you’ll be able to specify how you want the company to be run. Will you bring in partners? If so, how will you divide managerial duties? And what about possibly enlisting a third-party management firm? Business school will enhance your collaboration and delegation skills, allowing you to more readily adapt to a wide range of working relationships.
Attention to Detail
Your Operating Agreement and Articles of Organization will both cover a lot of ground, getting into some of the particulars of how your business is meant to run over the long haul. Business school can help train you to focus on the right kinds of details.
Regulatory Awareness
While LLCs don’t have a ton of regulatory hurdles, there are a few basic annual reporting needs. Business school should provide you with some foundational concepts related to regulatory compliance.
Fiduciary Responsibility
Business training can also heighten your sense of fiduciary duty, which is especially important as you seek to keep your business assets and liabilities separate from your personal ones.
Start Down the Path to LLC Success
The bottom line: LLCs can establish your business over the long haul. And to make the most of your LLC, formal business training is irreplaceable.
Author Bio
Amanda E. Clark is a contributing writer to LLC University. She has appeared as a subject matter expert on panels about content and social media marketing, as well as business ownership.