LLC or not to LLC?
To LLC or not to LLC is a question that every new business owner should be asking themselves. Though there are many other types of businesses a limited liability company (LLC) provides the members of the LLC protection from personal liability.
So let’s get clear on what a limited liability company really is; a business structure that is a median between a partnership and corporation that combines the pass-through taxation of a partnership or sole proprietorship with the limited liability of a corporation.
Choosing an LLC is filled with benefits! And how you benefit is a key component when making decisions for your business.
Limited Liability Company benefits:
Personal protection from liability
Regular Income distribution flexibility
Pass through taxation (usually get from a partnership; this helps avoid double taxation.)
Choosing how you’re taxed
Why should you create an LLC?
Tax advantages of course and it allows you to gain more credibility with your customers; giving a more established professional look to your company. But maybe the primary reason why you want to create an LLC is the fact that you can select how the LLC is taxed. You can figure out on your own how to file your taxes; either in the form of a Disregarded entity (Sole Proprietor), Partnership or a corporate entity. A Disregarded entity is treated as a sole proprietor, so your income will be seen as personal income. Partnership elections will “pass through” the pro-rata share of income, losses, deductions, and credits onto their partners’ personal tax return. If you opt for filing as a corporate entity your income will not pass through to your personal income tax return and you will be taxed at the corporate tax rate. However, I do not advise electing your LLC to be taxed as a corporate entity as you will be exposed to double taxation.
Here's a PLUS!
A lot of investors like the idea of handing over capital to LLCs, as they are trustworthy. In the end, it’s safe to say that opting for an LLC is a great option if you want to create a small business from scratch. It’s a stellar way to protect your assets, all while handling any legal requirements that come your way. It is a wonderful and reliable type of business, and one that can move onward and continue to exist even if the company creator/owner decides to retire!
