Advantages of Forming a Limited Liability Company

in Liability

There are many different ways to form a company, so it’s important to weigh your options to understand whether you want to be a sole proprietorship, partnership, limited liability company (LLC), S-corporation, or C-corporation. For many business owners, forming a limited liability company is the best option as it provides protection of your personal assets, offers tax benefits, and requires fewer ongoing formalities than a corporation.

Advantages of Forming a Limited Liability Company:

The process of forming a limited liability company is less formal than setting up a corporation. You have more flexibility with regards to how the company is managed, and your company receives the same limited liability protection enjoyed by corporations. As an owner, you are also protected from being personally liable for most debts and losses of the company.

Here are the top four benefits of forming a limited liability company:

  1. Asset Protection: This is by far the most important reason to choose to form a limited liability company. Since a limited liability company is a separate legal entity, creditors can only go after business assets. The owner’s personal assets are protected from liability of company debts. It’s important to note that there are important guidelines and principles that all LLC members need to know and follow to ensure that this limited liability protection is not lost.

  2. Tax Advantages: Statistics show the IRS audits C-corporations much more often than limited liability companies. This reason alone can make forming a limited liability company a better choice than setting up your company as a corporation or sole proprietorship. A limited liability company enables business profits to pass-through to the owner. You can also report your business income and include the company’s losses on your personal income tax return. In addition, allocation of earnings among members is flexible. Profits and losses do not have to be distributed in proportion to ownership.

  3. Credibility: Many clients and vendors prefer to do business with corporations or limited liability companies because the LLC at the end of the business name implies permanence and professionalism. Forming a limited liability company means that your business is registered at the state level, whereas a sole proprietorship is typically only registered at the city or county level.

  4. Easy Management: Forming a limited liability company makes managing most aspects of the business easier than managing a corporation. A limited liability company has fewer reporting requirements and ongoing formalities than a corporation.

Forming a limited liability company can be a great way to limit your liability, increase your exposure, and possibly limit your taxes. But it’s important to weigh a number of factors before deciding which type of business entity to form, and it’s a good idea to consult with your accountant or attorney to discuss which type is optimal for your unique situation.

If you want to learn more about forming a limited liability company and how this business entity benefits you both personally and professionally, visit www.TheDelawareCompany.com or call 1-888-338-2677.

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Jodi Kukla has 7 articles online

Jodi Kukla is the Director of Marketing for The Delaware Company, a full-service, online incorporation service provider, offering small-business owners a fast, easy, and economical way to form a corporation, limited liability company (LLC), or other business structure online or by phone. Visit www.TheDelawareCompany.com to incorporate online today. Call The Delaware Company at 1-888.338.2677 or email customerservice@theusacompany.com.

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Advantages of Forming a Limited Liability Company

This article was published on 2011/07/01