I'm wanting to join an already established LLC. that would want me to be a sole proprietor. But I can just start my own business and form an LLC. I don't want to put what little I have in jeopardy if something went bad with the relationship.
Your caution is a good thing. Joining an established LLC (assuming it was properly formed and maintained) provides some protection from business debts and your liability would be normally limited to the amount of your investment. You could add a layer of protection by a second LLC but (and other lawyers may differ) I prefer simplicity to artificial complexity. The one element you cannot miss is some due diligence on the business itself and tax issues which would be provided by an experienced CPA.
The above is general legal and business analysis. It is not "legal advice" but analysis, and different lawyers may analyse this matter differently, especially if there are additional facts not reflected in the question. I am not your attorney until retained by a written retainer agreement signed by both of us. I am only licensed in California. See also avvo.com terms and conditions item 9, incorporated as if it was reprinted here.
Although it may seem counterintuitive the fees a sole proprietor spends setting up business is more costly than organizing as a Limited Liability Company (LLC). A Limited Liability Company filing would offer more protection from liability than a fictitious name filing (as required for most sole proprietors). Although, it is only $70.00 to file a fictitious name, and $125.00 to file an LLC, an LLC is not required to incur the additional expenses of advertising. An individual filing a fictitious name is required to advertise, in a newspaper of general circulation and in the county law journal. If an individual, who is required to advertise, does not, they cannot maintain legal proceedings against those they would otherwise choose to sue. In the long view an LLC is usually the better way to go. Further, with an LLC your business name is protected, in that no one else can file under the same name in Pennsylvania, anyone can file the same fictitious name. If you decide to file a fictitious name, you receive no trade name protection, as anyone else can file the same fictitious name, or file the name as a form of corporation and thereby receive protection of the trade name, as the provisions of 54 Pa.C.S. § 332 (relating to effect of registration) under the Fictitious Names Act does not create any exclusive or other right in the fictitious name. The purpose of the Fictitious Name Act is to inform other who you actually are, and give you certain rights to bring law suits, not to protect you name .
Disclaimer: Please note you should not rely upon the information provided herein as legal advice. It is for general informational purposes only. Legal advice can only come from a qualified attorney after having had an opportunity to become familiar with all of the fact specific circumstances of a particular legal matter, and then to apply or research the relevant law.
Before I respond to your inquiry, I must state that we have not spoken, I have not reviewed the relevant documents and facts, and I do not represent you. Therefore, my discussion below is not a legal opinion, but is informational only. Finally, my discussion applies only to issues to which Pennsylvania, Delaware, New Jersey or Federal law applies, unless otherwise specified.
That being said, if protection of personal assets is your primary concern, then you should either join an established entity or form your own. However, the corporate form does NOT act as a total shield against liability. You should ensure you have the right insurance to cover any potential liabilities, and a good accountant, business attorney and insurance broker to act as your advisory 'team' to help walk you through some of the issues you'll face in starting and conducting a business. Your question indicates you're being asked to join an existing LLC; there are some risk issues here, as well. You should speak with a business attorney to determine the risk level you are facing and the best route for you to follow.
/Christopher E. Ezold/
I am an attorney licensed in the Commonwealth of Pennsylvania, and the States of Delaware and New Jersey. My practice includes employment, business and health care law. Before I respond to your inquiry, I must state that we have not spoken, I have not reviewed the relevant documents and facts, and I do not represent you. Therefore, my discussion below is not a legal opinion, but is informational only. Finally, my discussion applies only to issues to which Pennsylvania, Delaware, New Jersey or Federal law applies.
I agree with my colleagues and add the suggestion that you speak to your CPA about your tax status if you are a sole owner of an LLC you establish. LLC's with one owner are "disregarded entities" for tax filing purposes and that means that you will file a schedule C sole proprietorship schedule on your personal return, as well as a return for the LLC. Your CPA may advise you to establish an S corporation rather than an LLC. Best of luck with your endeavors!
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