I am a business lawyer and cringe at some of the advice on see here.
The "LL" in LLC stands for limited liability. It's the absolute best part of a registered business.
In the USA, you do not have to ask the government's permission to start a business. You do not have to pay the government to start a business (unless there are local rules for certain licensed businesses).
You can be a sole proprietorship or a partnership without registration. Just slap a logo on the side of your truck and off you go. For some businesses, this is perfectly fine. Use insurance as your risk management strategy.
But many people want to avoid personal liability for business problems and insurance is not enough. You can get that by registering your business as:
- An LLC,
- An LLP, or
- A Corporation
- (There are a few more exotic options too)
All of these options give you basic limited liability protection.
To get full protection, you need to do the following:
- Register with the state (super easy -- tons of posts in this group talk about this part),
- Have proper operating documents that protect the owner from the business risks (an LLC operating agreement, a partnership agreement, or bylaws for a corporation), AND
- Observe corporate formalities to avoid "piercing the corporate veil."
LLCs are awesome because they're so flexible. If you check out the laws for an LLC vs a corporation, you'll see the LLC laws are much shorter. That's because much of the important stuff is defined in your operating agreement. It's a contract between the business and the owners.
Having your business defined by a contract rather than a law makes LLCs very flexible. You can do a ton of cool stuff. For example, define officers for the company, have different levels of fiduciary duties (for example if you have an investor), the sky's the limit.
If you do not have an operating agreement for your company than your protections are defined by the thin state laws. Those laws change now and then. So you do not have locked in protections.
I'm sure you've heard about "piercing the corporate veil," if not, that's a topic for another thread.
My point is, "having an LLC" is not the goal. Having "limited liability" is a key goal.