A limited liability company, often called an LLC, is a commonly used business structure. This structure is widely considered one of the simplest ways of setting up your business and offers more protection for the owners than sole proprietorships or partnerships. Some of an LLC’s main benefits, in addition to its simple setup, include granting the business owner limited liability protection and offering pass-through taxation.
Limited liability protection refers to the coverage the business structure provides for your personal assets. Personal assets include your home, car, personal bank accounts, and so on. In legal terms, as the owner, or one of the owners, of an LLC, you will not be considered personally liable for your business’s debt or legal obligations. Knowing that the risks associated with business endeavors will not affect their personal assets gives owners a large amount of financial security and encourages them to therefore seek growth opportunities with confidence.
Another benefit of an LLC is its individual tax structure, pass-through taxation. Pass-through taxation gets its name from allowing the income generated by the LLC to “pass-through” directly to its owner or owners, who then report it on their individual tax returns. This eliminates double taxation, a customary corporate taxation process that taxes income at both the corporate and individual levels. This simplifies the tax process tremendously and allows owners to retain more of their earnings for reinvestment purposes, in turn incentivizing business growth once again.
Speaking to an experienced business attorney can help determine whether an LLC is the most fitting business structure for the company’s goals. The lawyer will look at your business goals and long-term plans to advise whether an LLC would be best for your business’s target or if another structure might be more suitable. A lawyer will also assist in writing and filing the documents required to start an LLC. This includes drafting the organizational articles, the operating agreement, and any other paperwork required by your state. With the reassurance that these documents will be correctly drafted and filed, working with a lawyer will add another layer of protection and simplicity to your future business.
After an attorney assists the owner with their initial setup, many LLC owners decide to maintain legal counsel on their direct business team. The attorney is then available to assist with any potential legal challenges and provide guidance and assistance in any situations where their knowledge may be beneficial. This can save an owner the large amount of time and funds that it would have taken them otherwise to research and resolve a legal issue.
All in all, if an LLC is right for a business, it is one of the simplest structures that still offers multiple business-growing benefits.
We extend our gratitude to Bachus, Brom & Taylor, LLC for their insightful blog on the importance of consulting a business formation lawyer.