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4 fundamental benefits of starting an LLC

You have a lot of choices when it comes to starting a new business. As an entrepreneur or aspiring small business owner, you may find the numerous business structures available a little overwhelming. You may think you should go for a corporation right off the bat or play it simple and operate as a sole proprietorship.

However, one of the best business structures for a small business is a limited liability company. Here are the main benefits of starting an LLC

1. Liability protections

If you opt for running a sole proprietorship or partnership, be aware that your business will not be a separate entity from you. This means that any company debts will be your personal debts, which may put your personal assets at risk. On the other hand, an LLC reduces your personal liability because it is a separate legal entity from you. When you run an LLC, creditors cannot use your personal bank account or home to collect business debts. 

2. Pass-through taxation

The IRS automatically considers LLCs as sole proprietorships or partnerships for tax purposes. This means you can take advantage of having your business income and expenses pass through to your personal tax returns. In contrast, C corporations have double taxation on the individual and corporate level. 

3. Less paperwork

If you form a corporation, you will need to keep extensive records, make annual reports, attend annual shareholder meetings and pay annual fees. An LLC does not have any of these requirements. Running an LLC is simple and easy while offering tax and liability benefits. 

4. Flexibility

Corporations have various requirements when it comes to ownership, management and profit distributions. LLCs offer a lot of flexibility. You can enjoy running a business free of restrictions on these areas.

An LLC gives you a simple and adaptable way to run your business. Talk to a lawyer if you are thinking about forming an LLC.

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