Choosing the right business structure for your newly launched company is one of the most important early decisions you must make. If you feel concerned about losing personal assets to pay business debts or a customer lawsuit, you need greater legal protection than the sole proprietor business structure offers you. At the same time, you do not need to file as an S or C Corporation as those classifications are for much larger businesses. Choosing to establish a limited liability company (LLC) can be the ideal compromise for your situation.
Understanding the LLC Business Structure
The main benefit of establishing your company as an LLC is that it provides the simplicity of a business partnership as well as its tax advantages and flexibility. You also receive the same legal protection for personal assets that corporations have. That means a creditor can’t come after your home or a person suing you could not demand the funds from a personal asset such as a savings or retirement account.
An LLC can have several members, which is the term used by the Internal Revenue Service (IRS) to collectively describe all owners of the business. You can have as many or as few business co-owners as suits your needs.
More LLC Benefits
The paperwork and fees to establish an LLC are generally minimal although it can vary considerably by state. You should be able to manage the filing on your own but may wish to consult an attorney anyway. Other advantages of this business structure include:
• Members can contribute towards operating the company or hire managers to do it for them.
• LLCs are pass-through entities for tax purposes. That means members receive business profits directly without the IRS taxing the profits first as a business. Members report their share of profits and expenses on their personal tax returns.
• You receive liability for your personal assets if you maintain separate financial accounts for business and personal needs.
First Source Capital invites you to schedule a consultation to help you determine if the LLC business structure is right for your organization.