If you are fortunate enough to enjoy a supportive, loving and friendly family dynamic, you may consider starting a business together. Perhaps you and your spouse have the type of relationship where you work well together and complement each other when it comes to strengths and weaknesses, which would certainly contribute to your success.
You may also want to pass on the business to your children when you retire and want to protect it for that purpose. Another of your goals may be to protect your assets from creditors and/or have the ability to bypass probate after your death.
Would you consider forming a family limited liability company?
You may already know that a limited liability company provides members some protection from personal liability for the debts and legal obligations of the business without all the paperwork and legal requirements of a corporation.
This makes an LLC attractive to many people. If you happen to be a family-only owned business, you could form a family LLC, which also helps with your estate planning. A family LLC also allows you to provide profit distributions for generations of your loved ones.
You will need to follow some rules, however
The rules for a family LLC do differ somewhat from a normal LLC. Only one member of your family may form the entity and manage it. You cannot form this entity to manage your personal residence, but you can form it for legal business purposes. You will need an operating agreement that specifically details and defines the following:
- Transfer of assets
- Rights related to ownership
- Functional decision-making
You will need to take certain steps to maintain the family LLC status and to make sure you and your loved ones receive the benefits derived from it. If not formed or maintained properly, you could lose the limited liability status, and your assets could end up vulnerable to creditors. For this reason, it is essential that you do everything correctly.
Before committing to this entity, you will most likely want to thoroughly explore all of the pros and cons of a family LLC. Obtaining the answers to your questions and concerns will help you make the best decision possible for your family and your business. Under these circumstances, it only makes sense to work with an experienced business formation attorney who can help you make your Texas business the success you envision.