Five Advantages of Starting an LLC
Many business owners wonder how to form an LLC. Certain business owners feel that forming an LLC has its own unique advantages, especially for newcomers to the business world. An LLC is otherwise known as a limited liability company. A 2015 survey found that 23% of small businesses identified as an LLC. In this post, you’ll learn the advantages of an LLC for your new company.
- Increased Flexibility
One key advantage of an LLC is the flexibility it offers. You’ll need to ensure your company has LLC within the title of the business. In 2010, there were 27.9 millions currently operating in the United States. Many small businesses prefer to have freedom from a more rigorous corporate structure. A business that defines itself as a corporation must adhere to the corporate structure. A corporation will need to have directors and shareholders in place. One reason for a business to become an LLC is that you’re freed from such structure. You are allowed to tailor LLC creation to suit the needs of your business which makes it highly adaptable.
- Asset Protection
A popular reason to become an LLC is for how it protects company vs personal assets. Unfortunately, many people find themselves in court against a sometimes sue happy public. If you do find yourself involved in a court case, having an LLC means not having to worry about liquidating both business and personal assets. Companies that have or work with any form of real estate should definitely utilize the LLC. Holding certain properties within the confines of an LLC protects it from seizure under most circumstances.
- Great for Businesses in Need of Seed Capital
Businesses that are in need of investments often become an LLC. An important part of forming a business is gathering valuable seed capital. If your business is an LLC, it’s likely to attract more investors. One reason investors flock to an LLC is that it gives them more freedom in regards to taxes. It’s easier to offset an investment made in an LLC than it is when investing in a corporation. A corporation isn’t avoided by investors by any means, it’s just that a corporation usually goes through firms.
- Perfect for Projects Short in Duration
Not all partnerships are going to be lifelong ventures. If you decide for your business to become an LLC, you’re allowed to state how long the partnership exists. It’s understandable to not know exactly how long an LLC will stay in place. An LLC offers additional flexibility in that you can extend terms if need be. A business owner may want to form an LLC in order to ensure that a new venture stays temporary in nature.
- Paying in a Decreased Amount During Tax Time
Many businesses become an LLC solely for the tax advantages. The first years in business are often filled with loss. It makes perfect sense to become an LLC in order to lessen tax payments throughout the year. An LLC can allow for members of the company to deduction these losses to use with other forms of income. Business taxes can be hefty, especially for a new company. If you want to minimize what you’ll pay out in taxes, it’s best to start an LLC over a corporation.
In closing, there are many advantages associated with starting an LLC. Forming an LLC offers new business owners a lot of flexibility. Corporations must be formed in a way that adheres to a traditional structure. An LLC can have its own structure whether there are four members or 400. One reason for a business to become an LLC is for asset protection. An LLC will not have to worry about business and personal assets being grouped into the same category. Not all companies will have the funding needed to fully operate. Investors love putting money into an LLC because of the tax flexibility for both parties. If you’re starting a project that isn’t planned to last forever, it’s best to start an LLC which lets you define the length of a venture. A huge advantage of becoming an LLC is paying in less during tax time. For many, an LLC is a highly beneficial way to start a new business.