1. An LLC is a way for you to be able to protect your personal assets both from creditors and from legal claims. If you have a business that sells merchandise to people and you never really considered incorporating and have only been operating as a sole proprietor, you are at risk. Something can happen and you will be at risk personally. For example, an individual walks through you shop and slips and falls. You can be sued in court for negligence and your personal finances can be at risk. By incorporating your business as an LLC you can avoid having personal liability and only risk your business assets.
2. An LLC gives business owners an ability to take advantage of tax planning strategies because there are certain tax deductions available to LLCs.
3. LLCs are more likely to qualify for loans with a bank due to a more professional image portrayed in comparison to a business being run as a sole proprietorship.
Law firms are organized in a variety of ways, depending on the jurisdiction in which the firm practices. Common arrangements of law firms include the following:
- Sole proprietorship – The attorney is the law firm and is responsible for all profit, loss and liability;
- General partnership – All of the attorneys who are members of the firm share ownership, profits and liabilities;
- Professional corporations – Stock is issued to the attorneys in a fashion similar to that of a business corporation;
- Limited liability company (LLC) – The attorney-owners are called “members” but are not directly liable to third party creditors of the law firm;
- Professional association – Operates similarly to a professional corporation or a limited liability company;
- Limited liability partnership (LLP) – The attorney-owners are partners with one another, but no partner is liable to any creditor of the law firm nor is any partner liable for any negligence on the part of any other partner. The LLP is taxed as a partnership while enjoying the liability protection of a corporation.
Law firms that operate in multiple countries will often have structures that are very complex and will involve several partnerships. An example of this is particularly relevant in jurisdictions like Hong Kong in which they restrict partnerships between the local and foreign lawyers.
One structure that is largely unique to giant multinational law firms is the Swiss Verein. This structure was first started byBaker & McKenzie in 2004. The structure is set up as follows, multiple national or regional partnerships are set up to form an association. The association shares branding, administrative functions and various operating costs, however, they also maintain separate revenues and will usually have separate partner compensation structures.
Other multinational law firms will operate as single worldwide partnerships, such as British or American limited liability partnerships (LLPs), in which partners also participate in local operating entities in various countries as required by local regulations.