If you have been thinking about becoming a business owner and forming a company, you may have troubles to decide what you should settle down for. You can be a sole-proprietor, or you can form a partnership, even a corporation. Have you been thinking about forming an LLC? If not, in this article, we’ll briefly explain why an LLC can be a good option for you.
What is a Limited Liability Company?
An LLC is a business structure that combines some of the best entities that can be formed in a partnership or a corporation. They are combined in terms of limited liability protection of a corporation. This legal business structure also has many tax advantages of a partnership company. To simplify it, by forming an LLC, you’ll be forming a hybrid business entity that’s has incorporated characteristics of a corporation, partnership or sole proprietorship which depends on the number of the owners.
However, before rushing your decision, you should know that LLC is neither a corporation nor a partnership business. It is a business association. It has limited liability as a corporation does and it has the availability of pass-through income taxation, just like a partnership does. The benefits of LLC are that it’s far more flexible than a corporation and also ideally suited for solo-proprietorship.
Forming an LLC
Establish a limited liability company will not be hard for you. The procedure is far easier compared to other legal business structures, and it requires minimum paperwork. Shareholders of LLCs are not responsible for company debts and during the requisite time, the directors may guarantee a credit settled to the enterprise. You should know there is no limited number of members who can form an LLC. Except for shareholders, this agreement can also include other limited liability companies and corporations.
The Benefits of Limited Liability Companies
LLCs are protected by a corporation’s liability which means it can exist as a separate entity, just like a corporation. It is also good to know that LLC members’ personal assets cannot are protected. They can’t be put at stake without a personal guarantee. Limited liability firms have a flexible profit distribution and include a lot of formalities like conducting meetings, recording resolutions and so on. LLCs are easy to run and don’t require exhausting corporate decisions.
When it comes to taxation, all the firm’s profits, losses, and expenditures are directed to the individuals who are members of the LLC. Since all the mentioned doesn’t go the company itself, we can avoid paying double taxation. In other business structures, you are obligated to pay both individual and corporate tax.
Improving Your Life with an LLC
How can this unique business structure improve your life? Simply – there will be no more business stress. You will have protected personal assets and enjoy tax benefits when your company borrows money or buys anything on credit, you will not be personally liable and at last but not least, it will be easier to raise capital. When in need of raising money for the business, having a corporation by your side will make things easier. You can take on investors by selling shares, get a loan from a bank or find a third party investor.