Whether you are starting a new business or working as a sole proprietorship, truly think about operating as an LLC, or Limited Liability Corporation. The LLC is one of the most common types of business organizations today, especially for entrepreneurs and other small to mid-sized companies. While it is not always the best option for everyone (speak to a business attorney to discuss your specific circumstances), organizing as an LLC will provide you some very important benefits, including the following:
Operating an LLC Protects Your Assets
As the name implies, the most important benefit of organizing as an LLC is limiting your liability. When operating as an LLC, your personal assets are generally shielded from business liabilities. For example, if your business is sued, your personal assets—like your home—are normally left untouched. In addition, if your business goes bankrupt, debt collectors are unable to seize your personal assets. Please keep in mind that if you are the sole owner of your LLC, there are specific asset protection issues you must discuss with your business attorney.
Taxation Benefits While Operating an LLC
In most cases, LLCs are taxed at the owner’s personal income tax rate, rather than any business rates. This can add up to significant savings on your overall tax liability because business taxes are often significantly higher than personal taxes. This also allows you to avoid the “double taxation” faced by corporations. Double taxation occurs when taxes on your income at the business level, and then once again on your personal income from the business. Forming as an LLC also allows you to deduct business and operating expenses from the gross revenue. Find out about other ways businesses are taxed by reading this blog.
Operating as an LLC Provides Flexible Ownership Options
LLC ownership is structured in virtually any way that the owners agree upon. Unlike with corporations, there is no need to create a board of directors or stocks that need to be issued. This makes it easier to add or remove ownership, as long as the existing owners all agree. These ownership options are made easier with a “Partnership Agreement” which can be drafted by a business attorney.
Enhanced Credibility
When comparing an LLC with a sole proprietorship, consider the improved credibility you’ll receive from customers and other businesses. The LLC designation is typically seen as a more professional option for doing business, and may help you appear more legitimate and more reputable.
While it’s important to weigh all the options for business type, many believe the LLC is the right option. If you would like to discuss this subject further, please give us a call today. An experienced business attorney will help navigate through your needs and help identify the best possible course of action.
John H. Walker