Every home based business owner has the choice to structure and operate their business in one of several different forms or entities. Each form has advantages and disadvantages. Without going into all of the details, I can tell you from experience that LLCs (limited liability companies) have become the structure used by most small businesses. One of the most important reasons or advantages for forming any legal entity like an LLC or corporation to run your business is LIABILITY PROTECTION.

You are obviously aware that a growing lawsuit epidemic is happening in the US and it only appears to be getting worse. Small business owners are prime targets for the 1000’s of lawsuits which are being filed each week. A lawsuit may be filed by some government agency, a disgruntled former employee . . . a customer . . . a business competitor or even a total stranger. There are a lot of potential risks.

One expert said your chances of being sued are higher than your chances of going to the hospital this year. I think that may be a bit of an exaggeration . . . but I do know that more lawsuits are being filed all the time . . . and starting a business only increases your risk.

Dont get me wrong. I am a strong proponent for small businesses. They are great . . . they help make dreams come true for many people and they can be your path to financial freedom, independence and success. They are the back bone of our society and one of the main supports of our national economy. My father was a small business owner all of my growing up years. I am absolutely in favor of small businesses.

All small business owners, including home based business owners, need to protect themselves. The most important step any business owner can take to protect yourself is to operate your business through a properly formed and maintained entity like an LLC. If you choose to do nothing, then you are a sole proprietor which means your personal assets are at risk if there is a lawsuit.

The LLC or limited liability company has been approved by law in every state to provide liability protection between the business and its individual owners. With so many lawsuits being filed, its no wonder that the number of LLCs being formed has grown by over 90% in the past few years. The primary reason is protection.

The best way to reduce the risks to small business owners is through intelligent business planning. Many new business owners think that lawsuits and personal loss will never happen to them. Please dont make that mistake. Once a lawsuit is filed, its almost always too late to start thinking about forming an LLC . . . because liability starts when the injury occurs and forming an LLC is not retroactive. You can’t go back and say . . . I should have done it.

If you are going to start a business, its crucial that you take the necessary steps to protect yourself right up front or as soon as possible. If you havent done it yet, don’t delay or procrastinate.

Wise business planning includes the formation of the proper business entity and the purchase of liability or business risk insurance when available. You cannot eliminate every possible risk when starting a business but you can substantially reduce the likelihood of a devastating lawsuit through proper planning and setting up the proper legal structure like an LLC.

You can get more informaiton about how to start an LLCs, liability protection, the best place to set up an LLC, the 4 essential steps to set up an LLC, and much more by getting your free copy of The LLC Guide for Business Owners described below.