New entrepreneurs who are thinking about starting a business and forming a company often aren’t aware of all the options they have. Due to their inexperience, business owners tend to rush their decisions without giving much thought or doing much planning how will they operate their company. Before you start a business, you have to take many considerations into account because every little detail can affect your success.
If you want to avoid exposing yourself to problems from the very start, the right choice is to form a limited liability company. LLC S corp is one of the most popular business entities available today. Due to their affordability and attractive taxation advantages, they are gradually replacing corporations and some other business entities known as the “go-to” structures.
What is A Limited Liability Company?
An LLC is best defined as a hybrid business structure that incorporates characteristics of a corporation and partnership. There is a limited number of members that can unite to form an LLC, so it allows you to create a company with a small budget. One LLC can include other limited liability companies or even an entire corporation.
Reasons for Choosing an LLC
Huge advantages of Limited Liability Company are that you won’t have any personal responsibility while retaining the right professional image. As we mentioned, this type of business entity can have one or more members which can be a significant advantage if you are to work with a small budget. Although it’s a little bit more complicated to form that a corporation and it requires separate bookkeeping, it will allow you to enjoy reduced taxation. Since you are basically not creating a company, you won’t have to pay corporate tax and all the company’s profits and expenditures will be directed to an individual shareholder.
Some business owners may think that separate income tax returns are a disadvantage of limited liability companies because a multi-member LLC is required to file its own income tax returns. This can be maybe a little bit time-consuming, but it is worth it because you’ll still be able to enjoy reduced taxation. If you choose to be a single LLC member, you can get some exceptional opportunities regarding how you will get taxed for income tax purposes. You have to be well informed before you make a move because a single member can choose to have a limited liability company disregarded for income tax purposes.
LLCs Are Best For New Entrepreneurs
We can conclude that limited liability companies are the most recommended business structures for new entrepreneurs. LLCs offer the same protection of your personal wealth from business liabilities just like in a corporation. Also, limited liability companies are very flexible when it comes to management and raising capital. The best way of getting liability protection for your personal assets is by using a corporation (S or C) or an LLC as the leading entity of operating your business. You cannot gain liability by becoming a sole-proprietorship. If you’re going to run a business the right way, you should do your best to run as efficiently as possible. Do this by forming an LLC and make your life easier.