What Is an LLC & What It Is Not
Ken Engel
As a business attorney working with clients throughout Minnesota and Wisconsin, I often speak with entrepreneurs and small business owners who are unsure what a Limited Liability Company (LLC) really is—or whether it’s the right fit for their business. While forming an LLC offers key benefits, it’s important to understand both its advantages and its limitations.
If you're in Minneapolis, Madison, Hudson, or Milwaukee, and you're thinking about starting or restructuring a business, here's what you should know about LLCs.
What Is an LLC?
An LLC is a flexible business structure that blends liability protection with simplified management and tax options. The owners, known as “members,” are generally shielded from personal liability—meaning their personal assets are typically protected from business debts or lawsuits.
Compared to corporations, LLCs come with fewer formalities, less red tape, and more freedom in how they're taxed. Depending on your situation, your LLC can be taxed as a sole proprietorship, partnership, S corporation, or C corporation. As a business formation lawyer in Minneapolis or River Falls, I help clients evaluate the best tax structure based on their goals and long-term strategy.
Myth: LLCs and Corporations Are the Same
This is one of the most common misconceptions I hear. While both LLCs and corporations provide liability protection, they are quite different in how they're operated and maintained.
Corporations require annual meetings, formal bylaws, and detailed records. LLCs, on the other hand, offer operational simplicity—making them ideal for small businesses and startups across St. Paul, Madison, and Milwaukee who want protection without unnecessary complexity.
Myth: LLCs Eliminate All Liability
While LLCs offer limited liability, this protection isn’t absolute. If you blur the lines between personal and business finances, or if your business engages in fraudulent activity, a court may “pierce the corporate veil,” holding you personally liable.
To keep your protection intact, it’s crucial to maintain proper records, separate accounts, and follow all legal requirements. As a business attorney in Hudson, WI, I work closely with clients to ensure their LLCs are properly structured and maintained.
Myth: LLCs Automatically Provide Tax Benefits
Another common myth is that forming an LLC guarantees tax savings. The truth is more nuanced. Depending on how the LLC is taxed and where it's formed, you may or may not see advantages.
Some LLCs benefit from pass-through taxation, while others may face self-employment tax or other state-specific obligations. If you're unsure, working with a business lawyer in Madison or Minneapolis can help you understand how your LLC structure affects your tax liability.
Why Understanding LLCs Matters
Choosing the right business structure is one of the most important decisions you'll make as an entrepreneur. Whether you're launching a new venture or restructuring an existing one, a clear understanding of LLCs—what they are and what they are not—can protect your assets, minimize risks, and position your business for long-term success.
As an attorney serving Minneapolis, St. Paul, River Falls, and surrounding areas, I provide individualized guidance on business formation, compliance, and long-term planning. If you’re thinking about forming an LLC or need to review an existing one, I’m here to help you make informed, strategic decisions tailored to your specific goals.
Ready to Start or Update Your LLC?
Let’s make sure your business is built on a solid legal foundation. Contact me today to schedule a consultation and learn how I can support you at every stage of your business journey.