The Benefits of an LLC

There are several major business structures in the United States including Limited Liability Corporations, or LLC’s, Partnerships and Sole Proprietorships. If you are starting a new business, you may consider registering your company as an LLC. Here is more about the benefits of an LLC:

Setting up an LLC

Tax Benefits

Unlike corporations, LLC’s do not file corporate tax returns. This means that each individual member of the LLC will report losses and profits on an individual form. This form of taxation is called pass through taxation and will help you avoid paying taxes as a company as well as a group of shareholders.

Credibility

LLC’s are often regarded with more credibility than some other business types. Your suppliers, lenders and buyers may feel that you are more “official” as an LLC, which can ultimately lead to better deals and a broader client base.

Limited Liability and Flexibility

The LLC company structure protects its shareholders from certain debts and obligations. For instance, if your company is sued, you and the other LLC members will not be personally liable for that lawsuit. Having your company registered as an LLC also allows more flexibility in structure than a corporation. LLC members can decide how their LLC will be governed as opposed to having a mandatory board.

Getting Started

Now you’re ready to go – here’s how to start an LLC:

1. Name your LLC

Choose the name of your LLC that best describe your products and services.  Make sure you check with your state’s law regarding the naming process, just to make sure that yours comply with the laws.

2. Setting up the LLC

Firstly, you need to decide how to manage your LLC: Is it member-managed or manager-managed? After that, you’ll need to register your LLC with the government. Fortunately, you can get federal paperwork out of the way with LLC online filing that is offered by several reliable websites. Don’t forget that even though the LLC part is done, you’d still need to obtain the necessary business licenses.

3. Create operating agreement

It’s better to be clear upfront than sorry.  An operating agreement states everything you need to operate the business – e.g. the assumed roles of you and your partners, as well as the management and financial structures.

For more detailed step-by-step, refer to this guide.

Conclusion

Each type of structure has its own benefits and drawbacks. Ultimately, you should consider your business goals, both long-term, and short-term, before registering under a specific business type. You should also make sure that your business partners agree that the specific business model is the right choice for the company.

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