LLCs: Do They Make Sense for Your Business?
Understanding the Limited Liability Corporation
The LLC is a type of hybrid business structure that offers many of the advantages of a corporation, but with the tax advantages and management flexibility of a partnership. It's a popular choice for sole proprietors who want to protect personal assets or secure additional loans - and an LLC can be one of the easiest and least expensive forms of ownership to organize. The limited liability company is now recognized in all 50 states plus the District of Columbia.
Sounds great, right? Well, it is for many businesses. But let's take a look at some of the advantages and disadvantages of forming an LLC.
Advantages of Forming an LLC:
• Liability Protection Without the Red Tape - Generally, there's no personal liability of members (owners) for business debts. And unlike a regular corporation, there are no requirements for regular stockholder meetings, board meetings, or formal minutes.
• No Tax - Unless you opt to be taxed, profits and losses are passed through to the members. With an LLC, there is no double taxation threat since a limited liability company is not a separate taxable entity. And for tax purposes, the allocation of profit and loss of an LLC doesn't need to be proportional to ownership interests.
• No Citizenship Requirements - You do not need to be a US citizen to own or invest in an LLC.
So why isn't everybody hopping on the LLC bandwagon? Let's be honest, nothing's perfect - there will be some costs and headaches that stem from operating as an LLC.
Disadvantages of Forming an LLC:
• Increased Banking Costs - Accounts for small businesses or informal partnerships are often free, as long as you keep a large balance. But a bank account for a limited liability company will probably come with fees $10, $20, or more each month. Something to keep in mind.
• More Complicated Tax Returns - An LLC will file its own tax return if operating as a partnership, C corporation, or S corporation. That means your return could cost as much as a few thousand dollars each year.
• More Paperwork - Documents for a limited liability corporation must be filed with the state, unlike a general partnership. That means a little more red tape.
• Unfamiliarity - The limited liability company is the new kid on the block. Although this is quickly changing, some people are not as familiar with the LLC as they are with a regular corporation - something to consider when luring investors, etc.
So the question you should be asking yourself as a business owner is, "do the benefits of forming a limited liability corporation outweigh the costs?" If you're still not sure, it may be time to talk with an expert.
While LLCs are pretty easy to set up by yourself, it might be worth your while to talk to an attorney or accountant about tax issues and the pros and cons of creating a limited liability company. Another great option is utilizing an online incorporation firm. Many companies like The Company Corporation, for example, specialize in offering their know-how to business owners who need a little help. They can answer your questions and assist you in setting up your LLC for a pretty reasonable price.
Related Tags: llc, limited liability company, limited liability corporation
Samantha Fishman is a web-based investor and entrepreneur. She operates dozens of sites and has an MBA in Technology Management.
Your Article Search Directory : Find in ArticlesRecent articles in this category:
- The No. 1 Rule For Projecting Confidence - Speak With Authority
One of the most important characteristics a person can project in a business setting - or any situat - After the Autumn Checkout European Debt Crisis and U.S. Brewing Rebound
In the commotion caused by the Fed on interest rates come to an end, the "disastrous" for the euro a - Advantages Of Arcade Game Rentals
There are many different advantages to arcade game rentals. Most people need something to release th - A General Primer on Truck Cargo Nets
In modern highways it is quite rare to see truck cargo nets in action, this is because they are usua - The United States Will Burst More Severe Financial Crisis
Not long ago, suddenly announced that the central bank to raise interest rates, the interest rate hi - Niche Marketing Profits - 3 Easy Steps to Finding a Profitable Niche Market Income in 10 Minutes
Like most beginners I was having a very difficult time trying to find a niche market to earn extra m - The Importance of Hospitality Management Consulting Firms Toronto
Businesses and the managers that help guide any business are in a constant state of improvement and - New Keynesian Theory Label
2010 winner of the Nobel Prize in Economics three theories have been labeled as "New Keynesian" labe - Federal Reserve Pouring Money QE2 Unpredictable Fortune
U.S. economist Milton Friedman proposed a "throw the cash from a helicopter" view, while the practic - Fiscal Consolidation Should no Longer Delay
British Chancellor of the Exchequer George Osborne today announced fiscal consolidation policy, shoc
Most viewed articles in this category:
- Common Financial Problems to Avoid
One must first change their habits and not procrastinate. American Consultants Inc at offers key fi - How a Bad Hire Can Hurt Your Business
What's worse - hiring the wrong person or not hiring anyone at all? Companies can become almost des - Joel Comm Is Dr. Adsense
What is Adsense? If you are new to making money online and net marketing, you may not know what Ads - 5 Steps For A Dynamic Wealth System Online
Recipe: Opportunity + knowledge + Dynamic Wealth System + Your Action = Massive Success!!! Step 1 - How To Stop Foreclosure
Losing your house to a foreclosure can be very scary. There are times when circumstances are ou - How to Always Pitch A Strike
As business owners, we are always working on new ways to convince people to become customers, client - Membrane Diffuser Solutions for Wastewater Treatment Systems
In the aeration basin of a typical wastewater treatment plant there are both organic and inorganic m - Another Year Hating Your Job or Loving Life?
Copyright © 2007 Mary Foley I've come to the conclusion that to be successful - really successf - Dyestuff Industry In India And China
World demand for dyes and organic pigments to touch $10.6 billion in 2008According to a study on dye - Cma-cgm Case : the Series of Lawsuits Continues in Syria, Lebanon, Egypt, France, England and the United States
Damietta company case : The series of lawsuits continues in Syria, Lebanon, Egypt, France, England a