How Does LLC Affect a Company's Daily Business?

If you're an LLC, you'll need to draw a clear line between your business and personal lives. Integrating your business and personal finances—or not understanding whether you're acting in your business or personal capacity—can result in you losing your liability protection.

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Take the following steps to minimize your liability risk:

Establish a business bank account and never mix business and personal funds

As a business officer or member, sign all business documents

On correspondence, invoices, business cards, and other documents include the letters "LLC."

Creating an LLC may also change the way you pay your members and handle taxes. In an LLC, self-employed owners pay their own income taxes and self-employment taxes, just like they would in a sole proprietorship or partnership.

However, some LLCs save money by electing S corporation taxation. The members of an S corporation can be company employees, with the company handling payroll and withholding taxes. The best tax status for your business can be explained and advised by a business accountant.

Depending on the state, you may be required to keep certain LLC records, as well as file an annual LLC report and pay an annual fee. Your LLC will remain in good standing with the state by staying on top of reporting deadlines.