A small business can protect itself just like the big companies do. Whether your business is part-time or full-time, home-based or out of a separate office you have the option of running it as an LLC.

What is an LLC?

LLC or Limited Liability Company is a business entity. Like a corporation, it will protect personal assets and offer some tax advantages. LLC's, however, have a more simple structure and require less paperwork than a corporation. For example, a corporation must submit annual reports and meeting minutes. An LLC does not.

Once you've established an LLC, you need to get a tax ID or employee identification number from the IRS. This is very easy and does not cost anything. With the tax ID, you can open bank accounts and credit cards for the LLC which is extremely helpful in keeping personal and business finances separate. For more information or to apply, go to irs.gov.

Note: You will get a tax ID or employee identification number whether or not you have any employees.

If you think an LLC might be right for you and you want to research the details, you can find tons of books on LLC's as well as books on small and home based businesses at the library, in bookstores and online. One very helpful resource to take a look at is

Nolo's Quick LLC: All You Need To Know About Limited Liability Companies

by Anthony Mancuso.

Filing an LLC

Filing is usually not too complicated but it does require some research and it does cost money. Each state will be different. Some states make it easy and inexpensive to have an LLC. Others do not. Before making a decision, look into the fees and possible taxes for your state. Start with your state's Secretary of State Office.

You can get an attorney to file for you or you can do it yourself. Hiring an attorney will be expensive so look at the paperwork first to see if you are able to and comfortable filing on your own.

Piercing the corporate veil.

An LLC will protect your personal assets to a point. It will not protect a business owner who has committed fraud or has carelessly mixed personal and business funds. This is one reason it is extremely important to keep your business and finances in order.

Unfortunately, even well managed, well run small businessess are targets of fraud and lawsuits. Luckily with an LLC, small businesses can get the protection they need without the complications and yearly paperwork of a corporation.