Choosing whether to form a Limited Liability Company (LLC) depends on your business activities, risk exposure, and long-term financial goals. At ALTA Estate Services, we help clients understand when an LLC strengthens their legal protection and when it adds unnecessary complexity. Mark Fishbein, our founder, emphasizes that the proper legal structure can shield personal assets, support business growth, and prevent costly mistakes. Before you invest time and money into forming an LLC, it is critical to understand when it makes sense—and when it does not.
- You Want Personal Asset Protection
Imagine this scenario: you’re a small business owner or a landlord, and you’re hit with a lawsuit due to an accident that occurs within the scope of your business activities. Without the protection of an LLC, your personal savings, home, and investments are all at risk.
At ALTA Estate Services, we’ve seen clients lose everything due to a single lawsuit. Mark Fishbein underscores this point: ‘A single lawsuit can be financially devastating.’ An LLC is a crucial shield that separates personal and business assets, safeguarding your wealth from business-related legal issues.
You should strongly consider an LLC if you:
- Sell products or services with liability risks
- Work in professions where lawsuits happen (contractors, consultants, etc.)
- Own rental properties accessed by tenants or visitors
- You Own Rental Properties
Owning rental property brings income and risk. If a tenant sues over a broken stair or unsafe condition, your entire net worth faces exposure if the property is titled in your name.
An LLC shields your assets by containing risk within the company. At ALTA Estate, we often recommend:
- Setting up a separate LLC for each property
- Managing properties through an LLC combined with a trust for estate planning advantages
Mark often states, “Real estate investors should view LLCs as a critical layer of protection.”
- You Have Business Partners
An LLC establishes clear legal protections if you start a business with partners. It allows you to create an operating agreement that defines:
- Ownership percentages
- Profit and loss sharing
- Procedures if a partner leaves
“Business partnerships are like marriages,” Mark jokes. “Without clear agreements, disputes can ruin everything.” An LLC helps prevent chaos and keeps relationships and finances protected.
When an LLC is OPTIONAL
- You’re a Freelancer or Sole Proprietor with Low Risk
If your business activities carry little liability—like graphic design, consulting, or writing—an LLC might not be necessary right away.
Mark Fishbein states, “If your work doesn’t expose you to lawsuits or major risks, staying a sole proprietor may be fine for now.”
Examples:
- Freelancers offering non-physical services
- Creators selling digital products
- You’re Testing a Business Idea
Delaying LLC formation could be smarter if you’re still early in building a business and not making a steady income.
Before spending money, ask:
- Have I secured regular clients or revenue?
- Am I facing absolute liability risks?
- Would I benefit from tax deductions for business expenses?
Mark advises, “If your business is still an idea, it’s okay to wait.”
When You Don’t Need an LLC
- You’re an Employee, Not a Business Owner
You do not need an LLC if you are a traditional employee working for someone else.
- You Rely on Business Insurance
Good insurance coverage sometimes provides enough protection without needing an LLC.
For example:
- A consultant may only need professional liability insurance
- A home-based business may be covered under homeowners’ insurance
“Insurance and LLCs are tools for protection, but they serve different roles,” Mark explains.
- You’re Only Holding Personal Assets
An LLC does not protect personal items like your home, savings, or vehicle. It protects business and investment activities.
Mark clarifies, “A trust or estate plan is a better option for personal wealth protection than an LLC.”
Costs of Setting Up an LLC
Before forming an LLC, understand the costs:
- State Filing Fees: $50 to $500, depending on the state
- Annual Fees: Some states charge annual renewal fees (up to $800)
- Legal & Accounting Fees: Professional help adds extra cost
“If you’re not generating steady income, an LLC may not be worth it yet,” says Mark Fishbein.
Final Thoughts from ALTA Estate Services & Mark Fishbein
“An LLC is a powerful tool when used correctly,” says Mark Fishbein. “Always consider your risks, income level, and business structure before deciding.”
At ALTA Estate Services, we guide clients through forming LLCs, creating trusts, and building complete estate plans. If you need strategic help, contact us for a consultation. We are ready to support your success.
Call your Business LLC Expert at (520) 797-1400 to learn more about Family Trust, Living Trust Preparation, and Asset Protection, including the Emergency Telephone Hotline Program afforded to you and your family members at no charge during times of crisis, and the other benefits of estate planning described above. Follow Mark Fishbein, Arizona Estate Planner , on LinkedIn or Facebook.
The text above is for general informational purposes and should not be considered legal advice. For more information, click Contact Us.
