One of the most important decisions you’ll ever make as an entrepreneur is choosing the right structure for your business venture. Early on, going it alone as a sole proprietor made sense. Now that you’re set to expand your business significantly, altering its structure may be necessary.
Forming an LLC or a limited liability company is one of your options if you wish to expand your business operations. But is owning an LLC worth it?
Come up with your own answer to that question by reading up on the benefits of LLCs.
You Enjoy Personal Liability Protection as an LLC Member
What are the benefits of having an LLC? For us, the biggest benefit of being an LLC member is only having limited liability.
For many entrepreneurs, the thought of partnering with others can be scary because they are no longer in complete control of the business. If a transaction goes seriously wrong, they may have to take a financial hit even if they were against the move.
You can mitigate the impact that kind of transaction has on you by forming an LLC. Since your assets remain separate from the LLC’s assets, there will be a clear cap placed on how much you could lose. The bad transaction will still affect you, but it won’t be a disastrous loss in all likelihood.
Flexible Profit Allotment Is an Option
The amount of money you decide to invest in an LLC upfront affects more than just your potential losses. It could also have a tangible impact on your profits.
LLCs give members full control over how profits are shared. More often than not, members will base profit-sharing percentages on the initial investments made.
Members who poured way more assets into the LLC can demand larger shares of the profits. If other members want to increase their share, they can also put in more assets later on.
LLC Members Benefit From Tax Savings
Taxes can eat into profits rather quickly. That is the case especially for those entrepreneurs who have to pay both corporate and income taxes.
If you want to reduce your tax obligations as someone who is still new to being a business owner, then an LLC is right for you.
LLCs are often regarded as pass-through entities so their profits will head straight to the individual members. The profits of the LLC as a whole will not be taxed. Instead, the members will simply have to pay their income taxes to meet their obligations.
LLCs Are Easy to Establish and Maintain
Finally, entrepreneurs may prefer forming an LLC because it’s easier.
The requirements of creating an LLC are easy to meet. You and the other members simply have to file the articles of organization to the office of the state that handles it. During filing, you will also have to pay a relatively inexpensive fee.
Members don’t have to do much beyond that. Even LLC maintenance is easy because it usually only involves paying some fees and completing some filings.
The benefits of creating an LLC are substantial and they can be useful to just about any kind of entrepreneur. If you want to ease into expansion, transitioning to an LLC is a wise choice.
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