Should I create an LLC? It’s a question that many business owners have asked. This article lays out a few reasons you should.
As we approach Thanksgiving and the holiday season, let’s take a moment to be thankful for all of our blessings. One thing that most business owners are not thankful for, however, is how confusing it can be to choose the right business entity for a company.
Are you wondering whether you should create an LLC for your business? Here are four reasons you will be thankful that you did.
It’s in the Name: Limit Your Personal Liability
If you run a small business as a sole propriety or a general partner, you might be surprised to find out that if your business gets into legal trouble, your personal assets could be in jeopardy.
That’s right. If someone sues your business or if your business files for bankruptcy, personal assets like your home and your car could be at risk.
Should I create an LLC for my business, you ask? If you want to protect your assets, you definitely should. It’s in the name, after all—limited liability company.
Avoid the Double Taxation of Corporations
Corporations also provide personal asset protection, but they are also subject to double taxation—income that the corporation generates and income that shareholders make on dividends are both taxed.
Many business owners do not want to deal with such high taxes. Known as “pass through” entities, LLCs are only taxed once.
Profit Sharing Flexibility
Unlike corporations and partnerships, which have their own rules for profit sharing, LLCs offer business owners flexibility in how they distribute company profits. How profits are split between owners is determined by the operating agreement.
The reason that this is important is that in some instances, business owners may not share responsibilities equally. If distributing profits in a fair and equitable manner is meaningful to you, creating an LLC might be your best option.
Maintain Independence in Your Business
On the other hand, if you want to operate your business as the sole owner, LLCs offer you the power to do so. Like a sole proprietor, you get to call the shots about how you run your business, but with the added protections offered by an LLC structure.
Even if you run the business with another owner/operator, you can stipulate in the operating agreement how decisions will be made.
Should I Create an LLC? Not without an Expert to Guide You
Creating an LLC is simpler than forming a corporation, but you should still consult with an expert before trying to do it on your own.
Are you interested in setting up your business as a limited liability company? Don’t hesitate to contact the experts at AM Law today. We will work with you and guide you through the process to create the business entity that is right for you. Contact us now to set up a consultation.