Why You Should Consider an LLC as the Best Legal Form for Your Business Venture
You’ve decided to start your own business. One of the first and most important considerations is the type of legal form to use for your enterprise. In an earlier blog, we looked at the advantages and disadvantages of partnerships and corporations. There’s another business form, one that’s been around for a while now—the limited liability company, or LLC. Here are the primary reasons you might want to consider setting up a limited liability company.
You Can Go It Alone
If you really want to be in business for yourself—without partners or shareholders to hold you down, you can set up a sole proprietorship, but there’s a lot of risk involved. You can’t really limit your liability with a sole proprietorship—your personal assets can be subject to seizure to settle the debts of the business. However, with an LLC, you can limit your liability to the amount of your investment in the business. Fortunately, most states allow an individual to be the only member of an LLC.
Your Liability is Limited
When you create an LLC, you’ve set up a separate legal entity. Accordingly, it’s the LLC that has liability to vendors and others. Just like a corporation, your personal assets are shielded from access. You can lose any property or cash that you gave to or invested in the business, but that’s the full extent of your potential loss.
The Tax Benefits
With a limited liability company, you’ll only be taxed once, unlike a subchapter C corporation, which pays both a corporate tax and is taxed when it makes distributions to shareholders. The income from an LLC passes through as ordinary income on your personal tax return.
Minimized Paperwork, Filings and Meetings
Though you’ll have to file articles of organization (similar to articles of incorporation) to set up your limited liability company, there are few other filing requirements tied to an LLC. In addition, while corporations must have regular meetings, must maintain record books and keep minutes, and must draft and implement by-laws, most states don’t require LLCs to do any of those things.
Flexible Profit Sharing
With a limited liability company, you won’t issue shares to determine percentages of ownership. To the contrary, you can simply establish in your operating agreement exactly how potential profits will be distributed, and any arrangement that all parties agree to is acceptable. Accordingly, one member may get 60% and the other 40%, provided the parties agree upon that distribution.
Contact Maris & Lanier, P.C.
To learn how we can help you protect your business interests, send us an e-mail or call our office at 214-706-0920 for an appointment.
Speak Your Mind