Benefits of Forming and LLC
You have already started a business as a sole proprietorship or general partnership, or are thinking about starting a business, and are wondering about the benefits of structuring your business as a Limited Liability Company (LLC). Business owners often think that forming an LLC is too costly or too time-consuming, and neither is the case. In fact, an LLC is easier to form, and cheaper to operate then a corporation.
The benefits gained by using an LLC typically outweigh any disadvantages. These benefits are, in many cases, unavailable to sole proprietorships and general partnerships.
Advantages of LLC formation include:
For specific questions on whether the corporation is the best structure for your business, it is best to seek the advice of an attorney or accountant.
The benefits gained by using an LLC typically outweigh any disadvantages. These benefits are, in many cases, unavailable to sole proprietorships and general partnerships.
Advantages of LLC formation include:
- Limited Liability - LLCs provide limited liability protection to their owners (who are called members). Owners are not personally liable for the debts and liabilities of the business; creditors cannot pursue owners’ personal assets, such as a house or car, to pay business debts. In contrast, as a sole proprietorship or general partnership, owners and the business are legally considered the same and personal assets can be used to pay business debts.
- Pass-through Taxation - LLCs typically do not pay taxes at the business level. Any business income or loss is "passed-through" to the owners and reported on the owners’ personal income tax returns. Any tax due is then paid at the individual level. However, LLC’s also retain the option of filing as a Corporation if that option fits the Members situation better.
- Establishing Credibility - Forming an LLC may help a new business establish credibility with potential customers, employees, vendors and partners.
- Fewer Ongoing Requirements - LLCs face fewer state-imposed annual requirements and ongoing formalities than do corporations.
- Organizational Structure - LLCs are free to establish any organizational structure agreed upon by the owners.
- Few Ownership Restrictions - There are few restrictions on who can be an owner of an LLC or how many owners an LLC may have, unlike S corporations.
For specific questions on whether the corporation is the best structure for your business, it is best to seek the advice of an attorney or accountant.