LLC Business Plan: Everything You Need to Know
An LLC business plan is important so that you know what your short and long-term plans and objectives are for your company.3 min read
An LLC business plan is important so that you know what your short and long-term plans and objectives are for your company. When drafting your business plan, remember that LLC owners are protected from personal liability for any debts and obligations owed by the business. This means that if the LLC can’t pay a creditor, whether its a lender, landlord, or vendor, the creditor cannot go after the member’s personal assets.
Choosing Management Structure
Its necessary to choose how your LLC will be managed. You can choose to have the members manage the business, which is referred to as member-management. In this case, all members will have absolute oversight and responsibility of the operations of the business. The operating agreement should specify how each member will oversee the company, especially if members have specific roles and responsibilities.
Alternatively, you can have a person or business manage your LLC. This LLC will be referred to as a manager-managed LLC. This means that the manager will oversee the daily operations of the business. The members will then only have voting power and oversight of the significant business decisions.
Elements of a Business Plan
There are certain elements that should be included in all business plans. A business plan allows financial lenders and investors to reference your business plan so that they are aware of your goals and objectives.
First, you’ll want to provide an executive summary, which will be the overall plan for your business, along with the steps needed to expand and grow your business. Next, you’ll want to provide a business background, specifically identifying the skills and experience of each member in the LLC.
You’ll want to draft a marketing plan, which will indicate what products and services you are going to offer to the public. You’ll also need to include the price of each product/service, how you will market such products and services, and how you plan on advertising to draw in new customers. You’ll then need to specify what actions your business will take in order to meet the objectives and goals you have for your LLC.
Another key item in your business plan will be the financial management, statements, and projection. This includes the capital that will be contributed by each member, the monthly budget, anticipated expenses, the expected return on investment, balance sheets, and other strategies for increasing your capital. You’ll need to identify the operating procedures for your LLC, which include if you plan on hiring employees, costs for obtaining insurance (workers compensation, unemployment insurance), and obtaining professional equipment and/or furniture. You’ll close out your business plan by reiterating your goals and objectives; essentially recapping how you will reach what is mentioned in the executive summary.
Limited Liability Issues & Exceptions
As previously noted, while members in an LLC have limited liability in terms of the business's debts and losses, you should know that there are some exceptions to this general rule. Some examples of when an LLC member could be found personally liable include:
- If the member injures someone, particularly if the injury occurs on-site at the LLC principal place of business
- If the member personally guarantees a loan given out by a bank in which the business defaults
- If the member fails to deposit the taxes that are withheld from employee wages, i.e., fraud
- If the member engages in any other type of fraud or illegal act that causes harm to the company or someone else
- If the member co-mingles LLC assets/business with his or her own personal assets
Regarding the last item, if a member doesn’t separate the LLC assets from his or her own assets, then a court might determine that the LLC is not separate and distinct from the member. This can cause personal liability for all debts of the business. A good way in which to separate your business is to obtain an EIN.
Furthermore, you should put enough capital into the LLC to protect it from potential losses, i.e., ongoing and unexpected expenses.
If you need help coming up with an LLC business plan, you can post your legal need on UpCounsel’s marketplace. UpCounsel accepts only the top 5-percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law, and average 14 years of legal experience, including work with, or on behalf of companies like Google, Menlo Ventures, and Airbnb.