Whether you’re one person or among a group of people wanting to start a business in the United States, there are a few different options to choose from. Most people in this situation go for starting up a limited liability company, or an LLC, and for good reason. LLCs offer business owners protection, and on the other hand, are more flexible than other options such as incorporation. Here are the benefits of forming a limited company.
You Have Limited Liability
The main benefit of starting up an LLC is apparent in the name itself: an LLC offers you legal protection that you simply wouldn’t have if you were simply self-employed. Basically, the members of an LLC are not responsible for the debts of their company. For example, if someone chose to sue your LLC, you would not personally be liable for the damages; if your company was unable to pay, your personal assets, such as your home or car, would be left alone.
LLCs Offer Flexibility
Choosing to create a corporation rather than an LLC can impose on you many rules and regulations regarding company structure. On the other hand, an LLC can be created on behalf of one person or many people, and you decide how your company, including management, is structured. Not only that, you can also choose how profits made by your company are distributed among its owners.
Less Paperwork to Do
Unlike a corporation, an LLC doesn’t have shareholders, which means that business owners need not keep track of stocks, minutes, or certificates. Instead, as an owner, you have more time to focus on your business, rather than the paperwork that goes along with it.
Rather than file taxes on behalf of the business, an LLC still treats individual owners as self-employed when tax season approaches. If you’re the sole owner of your company, you’d be treated as a sole proprietor, and if there are multiple owners, the company would be treated as a partnership. You may also choose a tax scheme that’s similar to that of a corporation’s. Either way, LLC business owners avoid double taxation, so they don’t pay tax on both the business’s income and their own income.
While you may fancy yourself a credible business person, not everyone will see it that way. In fact, your business will gain credibility if you decide to create an LLC. Not only does having an LLC to your name show dedication and professionalism, it also looks more impressive than operating as a sole proprietor. As a result, other companies will be more likely to want to work with your business.
While these are just some of the benefits of forming a limited company, there are many small details you must pay attention to. There may be difficult decisions to make, especially if you are entering a partnership with others; transparency will be key, especially in the beginning stages of your business. Finally, be sure to research carefully and have a solid business plan before forming your LLC.