This is an archived article that was published on sltrib.com in 2011, and information in the article may be outdated. It is provided only for personal research purposes and may not be reprinted.

Jennifer Reuting, author of Limited Liability Companies for Dummies, says roadblocks to forming an LLC have all but disappeared.

Explain why the old drawbacks have changed.

If you were to ask me seven or eight years ago whether a LLC was a good option for small businesses, my answer would've been "maybe." Today? My answer would be "definitely." When LLCs were first established, they were an evolved form of the limited partnership. The courts didn't know how to rule on them, so judges sort of made up the rules as they went along, and the Internal Revenue Service didn't know how to tax them. Were they partnerships? Or were they corporations? This resulted in a lot of arcane requirements that LLCs had to fulfill, such as having a limited lifespan (usually 30-50 years) and ownership that wasn't freely transferable. Over the years, all states and the IRS have come to accept LLCs and have granted them more flexibility than any other entity. The old restrictions no longer apply. Case law has been substantiated, so you know what your limitations are before you're dragged into court. In a word, LLCs are solid.

What are the advantages of forming a LLC?

Liability protection and flexibility. Unlike corporations, LLCs have two levels of liability protection, one that protects your personal assets and another that protects your business assets from your personal liability. This second layer means that personal creditors cannot liquidate your business in order to settle your personal debt. LLCs also are more flexible than any other entity type. You can structure your ownership, management powers and voting rights however you want. You can even elect how your business shall be taxed. All of this is done in your company's operating agreement, which is the most vital document your LLC can have. You can draft a customized agreement through an attorney or through websites such as DocRun.com, which are low-cost alternatives.

Give tips for keeping your liability protection intact.

One of the easiest ways to lose your liability protection is to treat your LLC as an extension of yourself. This is often referred to as an "alter ego." As Freudian as that sounds, it's actually pretty common and easy to do. Ever use your business check card at the grocery store? Well, that's commingling funds — one of the most surefire ways to have your LLC deemed as an alter ego. In addition to keeping separate finances, you'll also want to create a legal separation when signing documents. The best way to do this is to sign all business documents with your name and your title, or your name on behalf of your company name. Example: "Jennifer Reuting, President, MyLLC.com" or "Jennifer Reuting, on behalf of MyLLC.com."

Any other words of caution?

Unless you are planning on taking your company public, LLCs don't have many drawbacks. They are flexible enough to apply to almost any situation. The danger lies in not forming a custom and complete operating agreement. Because LLCs are so flexible, you must tailor them to your needs. If you fail to do this, then the state has default laws that will be imposed on you and your business — and usually they aren't very favorable.

— Dawn House Jennifer Reuting, author