Reasons to form an LLC
Top 10 Reasons To Form An LLC
New business owners must decide early on how to organize their business, and one increasingly popular type of organization is the Limited Liability Company or LLC. This structure can be appropriate for both small businesses and larger companies, and it’s important for owners to carefully choose the best organization for their unique business. Changes – from a sole proprietor to LLC, for example – can be made later on but may entail lengthy paperwork and additional fees.
These benefits to forming an LLC will help you decide if a Limited Liability Company is right for you.
- An LLC protects your personal assets. Owners, called “Members” in this business structure, have limited liability for the business’s debts.
- Likewise, if the business is sued, the members themselves are usuallyprotected from litigation.
- Protect your trade name. States often offer LLCs the opportunity to register their business names which protects the name from being used by another company or individual.
- Having the term “Limited Liability Company” or “LLC” behind your business name adds credibilityand can garner more respect from potential clients and customers.
- An LLC can have multiple owners or members, unlike a sole proprietorship which has a single owner.
- Avoid ‘double taxation.’ An LLC doesn’t file taxes itself; instead, the LLC income “passes through” to the members’ personal income tax returns, which means the income is taxed just once.
- Members of an LLC may deduct the full cost of health insurance premiums paid for themselves.
- Forming an LLC may make it easier to raise capital. Investors may look favorably on the LLC for two reasons: 1) It is a structured business and 2) They will not be held personally responsible for any business debts.
- An LLC is perpetual, meaning that the existence of the business continues after a member dies or leaves the company. A partnership, on the other hand, must be completely dissolved if even one owner leaves.
- Transferring ownership is easy with an LLC. Members may sell or transfer their interest in the company to another party at any time without the company itself needing to be reorganized.
Deciding how to organize your business is a serious matter. Along with the advantages of a business structure like the LLC come specific responsibilities and certain disadvantages.