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The Advantages of Forming an LLC

On Behalf of | Jan 26, 2017 | Business Litigation |

Starting a business is a risky and rewarding venture that is filled with significant decisions that will have an impact on the future of the company. Many people who have started a business have looked around at other companies and seen an “LLC” designation after their name.

As a result, one of the first thoughts that often pops into people’s heads when contemplating a new business venture is whether or not they should form a limited liability company, or an LLC. This question is an important one, as it has numerous implications for a company that is trying to get off the ground. 

The Tax Benefits Surrounding an LLC

People should understand that an LLC has a number of tax benefits once formed. The IRS does not look at the LLC as a separate entity for its tax purposes. This means that the IRS is not going to tax the LLC in a direct fashion. The members of the LLC will get to determine how they are taxed on an individual basis. If the LLC is has a single member, the profits and losses of the LLC aren’t taxed as a part of the company. Instead, this information will be taxed under the tax return of the single member’s tax return. If the LLC decides that filing as a corporation is in their best interest, they could also file as a corporation. This kind of flexibility is perfect for people who desire to minimize the amount they pay in taxes.

More Time for the Business

One of the benefits of creating an LLC is the time businesses will save on the paperwork. LLCs are flexible entities when compared with other corporate entities such as a C-Corps or an S-Cops. An LLC can create an LLC operating agreement that specifies the rules that govern the company. This will lead to less stringent requirements when it comes to business compliance which translates into less paperwork for the company. This low amount of paperwork is a reflection of the ease with which people can keep their LLCs in good standing with the governing bodies. Don’t neglect the amount of time that paperwork could potentially consume. Spend this time growing the business instead.

LLC Stands for Limited Liability for a Reason

The name is limited liability company for a reason. LLCs provide important protection for all of its members from potential liability. Specifically, this concerns the liability for any court verdicts or debts that the company accrues. If creditors come hunting for debts from the company, the creditors cannot target the members of the LLC. This protection is not granted to people who form a traditional partnership or a sole proprietorship. People who forget to file as an LLC could pay a steep penalty to creditors.

Anyone with questions or concerns regarding the legal challenges surrounding their business should consider contacting an experienced attorney for guidance. An attorney can help new business owners to choose an appropriate legal designation and to aid them in any business disputes and litigation that may arise during the course of their business’s operations. 

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