What does LLC mean to the consumer?
When I see a company labeled as Limited Liability Company, I think, "They aren't putting their heart and soul into this business." I then proceed to imagine that they might not be the best option for the service I am looking for.
To be an educated consumer, what should I actually consider when deciding between services, given all are equal aside from the type of business?
2 Answers
I would say that in B2C it means NOTHING to the customer. He doesn't care about the legal structure of the company (he often doesn't know what are the details of the LLC)
He cares about the product, after-sales service, brand image,... satisfaction of his need. And for that, he doesn't need to know.
In B2B it can be somehow different but in general, the customer has the same concerns as in B2C but with more accent on stability and after-sales... But still, you just heve to take it into account in the comunication/ or product/service conception and it will be OK.
And a good B2B buyer knows, that not everybody has the means to create "bigger" legal entity.
So in my humble opinion, care about your client and his satisfaction - not about the legal form of your company.
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"He doesn't need to know" isn't a legit answer to my question. I am asking this question as a consumer. What I (think I) know about LLCs are that if the business fails, the owners don't lose their belongings in the process. Perhaps this isn't the proper place to ask to be an educated consumer but there are no current better SE's. – Agweber 11 years ago
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to agweber: now I understand better. But still I think that the legal form isn't important in general (exceptions: health, pharmacy, cloud services,...). LCC doesn't mean that founders want avoid responsibilities. Different legal forms requires different level of bureaucracy and decision making process that can be a hurdle to the business (e.g. some dynamic technological company vs. big company with hunderds of investors). But of course, if you want to entrust your confidential information to some cloud service, then indeed look at the legal form. Or even better at the history of the company. – Data Smarter 11 years ago
Let me start to answer this question by comparing the liability of LLCs vs corporations and sole proprietorships in turn. (Corporations, LLCs, and sole proprietorships/general partnerships are the three broad categories of business organization, though obviously, that's a bit of a simplification, and can also vary by location.)
It's true that limited liability means the owner doesn't necessarily lose everything from a failed business. From that, it could theoretically be argued that an LLC owner doesn't has as much skin in the game. However, corporations also have the same limited liability protections. So a consumer should not treat an LLC as "less liable" or "less invested in the business" than a corporation.
Sole proprietorships, on the other hand, don't get these same protections, so it's easier to argue this point here. But I think it's easy to make the case that an LLC is likely more invested than a sole proprietorship. LLCs are very easy to set up, and aren't very expensive. Most sole proprietorships are formed on the fly, informally. (It's what you are if you just start selling stuff.) Forming an LLC means the owners have put some thought and care into forming the business. If they've formed an LLC, it means the owners have considered worst case scenarios, and want to protect their family from catastrophic losses. It's evidence that the owners are being thoughtful and careful. I think most consumers who understand the details here would have more trust in the company, rather than less. The third point I want to make is that owners of LLCs often don't actually get away with no personal liability, despite the name. For example, if a new LLC shows up at a bank asking for a loan, the bank is going to make sure that the owners still have personal liability on the loan, in case the business goes under. They want to be able to have a way to secure the loan against failure like this.
Now having said all that, just because consumers shouldn't be concerned about the "limited liability" label doesn't mean that they won't be. As DataSmarter mentions, I think the vast majority of consumers won't know or care about this, but I'm sure there will be some who do. For them, you can either explain this stuff to them, or just work hard to earn their trust and show them that you have a high level of commitment to the company's success. How to do that, of course, is a whole other question.
