Simple Small Business LLC Formation Guide For Intrepid Entrepreneurs


If you are an entrepreneur, you are no doubt researching a ton of information regarding small business LLC or sole proprietorship, among other topics to help your business, especially if you only have a tech background and no business experience. All the information available can make this process very overwhelming. If you are a feeling a little bit confused by all the new information you have to take in, relax. This post will cover the basics of small business LLC. This way, you can narrow down the field and figure out what type of small business you would like to open. Continue reading below for more.

What Is A Small Business LLC?

A small business LLC stands for limited liabilities company. These businesses can be owned by one individual or a group of individuals. However, this is also dependent upon where you live. Small business LLC criteria vary from state to state. Many business owners assume that incorporating their business to form an LLC is costly and time consuming.  However, that is not the case. The process to incorporate is actually pretty simple and provides business owners a host of benefits. To learn more before deciding whether a small business LLC is right for you, continue reading.

Small Business LLC Advantages

There are a huge number of advantages to forming a small business LLC. First and foremost, your assets are protected. As an entrepreneur, you will already be putting your finances on the line by opening your own business. However, when you incorporate to form an LLC, your personal assets are considered separate from your business. This is a huge advantage. If your business goes under, you will not have to worry about losing your home or car due to late or missed payments. Another huge benefit to small business LLC is the ability to file business earnings as personal income come tax time. You do not have to pay taxes as a business, just as an individual. This is especially beneficial because you will not face additional taxes. These are just two of a large number of advantages to small business LLC. To learn more, conduct further research.

Small Business LLC Disadvantages

Small business LLC does come with its disadvantages, as well. This is especially true if you do not choose to organize a small business LLC operating agreement. If you do not agree on a set method for operation, you face the possibility of having to deal with losing your LLC should one owner depart from the business. In many states, an LLC ceases to exist if one member leaves the group. That means if just one person does not really know how to be an entrepreneur and decides to leave, you are out of luck. This can be avoided however, using an operating agreement. Another possible disadvantage is the cost associated with incorporating. The process of declaring a small business LLC is more time consuming and costly than choosing a sole proprietorship or general partnership. If you are strapped for cash now, this may factor into your decision. However, it is important to remember that in the long term, small business LLC advantages greatly outweigh any of these possible disadvantages. Think about this closely before allowing the disadvantages to sway your decision.

What Documents Do I Need?

If you are deciding to form a small business LLC, there are some key documents you are going to need to complete. The requirements for forming an LLC vary by state. However, all LLC formation requirements at the state level adhere to the same general principles. The two documents you will need to form a small business LLC structure are:

  • Articles of Organization
  • LLC Operating Agreement

As long as you have these two documents filled out and completed, you are in good shape. Just remember to conduct further research to find out about specific state requirements for LLC formation in your area.

What Are My Other Options?

In order to make the right decision for your future business, you need to know what your options are and how to select the one that helps you best prepare for growth. There are many other routes you can take for your small business. As mentioned above, there are also the sole proprietorship and partnership routes. You can also choose to incorporate your business into a S-corp or regular corporation. Your future business also may qualify as a cooperative, if you plan to provide a service that you will also be using. There are many different types of small businesses out there. It can all be overwhelming. However, knowing what your options are is the best way to get started. Remember to look into sole proprietorship, partnership, S-corps, corporations and cooperatives. This will help you to make the right decision regarding small business LLC for you.

If you are an entrepreneur looking into possibilities for your future business, you are probably primarily focused on small business LLC. Rightfully, so. Small business LLC provides your business, and you, with many advantages. Some of these are tax benefits and asset protection. However, if you are not prepared with an operating agreement, you may face some disadvantages if a business partner decides to leave your joint venture. Remember to conduct further research regarding the options and alternatives mentioned above. Then, you will be properly prepared to form your own small business LLC. Good luck!

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