Many business owners are considering limited liability corporations (LLCs) as the structure of their startup businesses. As many business owners will tell you, when done correctly, an LLC can be one of the easiest and most-affordable methods to launch a company. Despite the numerous protections and financial advantages LLCs offer new business owners, many are still unsure if they are the right organizational structure for their organizations. If you are wondering if a new LLC is the right business structure for your startup, continue reading this post.
Safeguards Your Liability
Questionably the largest reason business owners should consider limited liability corporations is to safeguard your liability. LLC ownership provides you numerous protections towards your personal and overall business liability. For example, you are protected against claims for damages. This protects you if somebody is hurt on or by property owned by your business. You are also shielded from liability claims rising from vendor disputes. If a vendor attempts to charge you more than you are actually owed, your limited liability protects you against legal claims. Furthermore, you can even be protected against unpaid business debts that are not personally guaranteed. If you are considering a small business LLC evaluate how they protect your business liability.
Easy Annual Maintenance
Structuring your business through an LLC provides you easy annual maintenance. In addition to limited liability, comes limited maintenance responsibilities. Annually, you are only responsible to complete an annual report. This must be accompanied by a filing fee, and generally is completed to update your various managers or stakeholders. Some states may require LLCs to hold annual formal meetings. Other than that, you are only responsible to complete annual forms regarding your tax classification. This allows you to focus on the operations of your new startup rather than maintaining the organizational status of your business. Consider how structuring your startup through a limited liability corporation provides you with easy annual maintenance.
Ability To Restructure Tax Classification
When you form your startup as an LLC, you have the ability to eventually restructure your tax classification. This feature is completely unique to limited liability corporations. Simply put, LLC owners can choose the structure they will use to be taxed. Most LLCs are classified as pass-throughs, which pass taxes on to members. However, you can also choose to be taxed as a C-Corporation and file your own return. In addition, some LLC owners choose to classify as an S-Corporation in order to claim other unique tax incentives. For example, being classified as a C-Corp, members can pay themselves without incurring self-employment taxes. LLCs offer tax classification options to business owners throughout ownership.
Flexible Management Options
Limited liability corporations provide business owners with unique flexible management options. LLCs can choose to be managed by their members. Under this system, members can actively partake in daily operations. Most states file limited liability corporations as member-owned unless otherwise specifically specified. Member ownership is particularly useful for business owners who are seeking other experienced business owners and professionals for operational advice. If you are considering an LLC organizational structure for your startup, consider the flexible management options available.
Taxation Exemptions On Profits
Structuring your startup as an LLC provides you taxation exemptions unique to other organizational structures. A number of LLC owners choose to classify their tax structure as a pass-through organization. Under this system, profits are passed directly to corporation members without government taxation. Rather, these profits are eventually taxed on members’ federal income returns. Pass-through entities make your annual tax filing process simpler than corporation-level filing. In addition, it protects you against business losses. If you do incur a loss, payments are split across all members, reducing your personal tax liability. If you are considering structuring your new business as an LLC, consider the taxation exemptions it provides.
Many business owners are looking to limited liability corporations to structure their new startup businesses. There are several reasons business owners are looking to start an LLC. LLCs safeguard business owners’ liability. Being the owner of an LLC provides easy annual maintenance options. In addition, it allows you to restructure your tax classification whenever desired. Consider the flexible management options offered by structuring your startup as an LLC. Furthermore, be aware of taxation exemptions that limited liability corporation ownership provides. If you are contemplating whether a new LLC is the right business structure for your startup, consider the points mentioned above.