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3 benefits of choosing an LLC as your business structure

On Behalf of | Nov 5, 2021 | Business Formation & Litigation |

There are many different forms that your future business could take. The exact legal structure you choose for your business depends in part on your plans for the company.

Many people just starting out, even those with hopes of expanding in the future, may choose to start a limited liability corporation (LLC) rather than a more complex corporate entity or a sole proprietorship.

An LLC can make business ownership a little safer and easier to achieve. What are the benefits that make an LLC so attractive to entrepreneurs?

The ease of creation and maintenance

More complex legal entities take substantially more effort to start and often involve multiple people rather than just the business owner and their legal representative. An LLC requires planning and thought before you start the business, but it is comparatively simple to form and also simple to maintain, typically requiring annual tax filings and state paperwork.

The protection from personal liability

When you own a business as a sole proprietor, someone with a judgment against your company might eventually make a claim against your personal assets. A judge could even garnish your future wages to help you repay a judgment. Creating an LLC establishes a layer of protection between the business owner and the company.

The owner’s personal assets and future income have more protection in the event that the business fails or faces some kind of legal loss. Of course, ensuring these protections requires that a business has the right documents in place and that the owner avoids commingling personal accounts and assets with business ones.

The possibility for pass-through taxation

When you own a business as an LLC, you don’t necessarily have to pay taxes on the business income directly. You can claim the profit, after deducting certain operating expenses, as an individual, making it subject to certain deductions and credits for which you qualify.

The tax benefits of an LLC are one of the big attractions to this business form, as it can result in substantially less tax liability than certain other business forms.

Determining the right form for the business you want to start is just one of the important early steps you will have to take as a business owner.