With the excitement of a new startup comes the need to make the important decisions that set the foundation for your fledgling business. One of these decisions involves choosing the form of a business structure under which your startup will operate. For many entrepreneurs, a limited liability company, or LLC, maybe the best vehicle for running a new business.
Which Business Structure Should You Choose?
As a new entrepreneur, you’ve likely been evaluating the following forms of business structures:
- Sole proprietorship or partnership
- Limited liability company (LLC)
While each of these has its own advantages and disadvantages, most small businesses choose to begin operations as an LLC because of the significant advantages that the limited liability company structure offers over other types of business entities.
Your business structure isn’t set in stone, of course. With the help of a Springfield business lawyer, you can always change from one type of structure to another over the life of your business. But the reality is, it’s far less complicated to choose the optimal structure for your new business right from the start.
3 Benefits of Running Your Business as an LLC
There are a number of advantages to operating your new startup as an LLC. The top three benefits are:
- Limited liability protection. With a sole proprietorship, you remain personally liable for your company’s debts. But if you set up an LLC for your new business, you won’t be personally on the hook for the debts and obligations of your business. This sets the LLC structure apart from a sole proprietorship. While there might be instances where you do remain personally liable – for example, if you decide to personally guarantee a loan for your LLC – in most situations you will have limited liability and your personal assets won’t be at risk.
- No double taxation. Corporations are subject to double taxation. This happens because the income a corporation earns is taxed at a corporate level, and then also taxed at an individual level when corporate profits are distributed to shareholders in the form of dividends. An LLC, however, is regarded by the IRS as a “pass-through” tax entity. This means the income earned by an LLC is passed through to the LLC’s members, where it is then taxed.
- Less mandatory requirements. Operating your business as an LLC rather than a corporation means you’ll have to meet fewer mandatory filing and reporting requirements. While corporations need to file paperwork on a yearly basis, most LLCs won’t have such obligations. And while a board of directors is required for a corporation, you won’t need to set up a board for your LLC. All of this adds up to a reduced cost when it comes to running your LLC.
Consult a Springfield Business Lawyer to Set Up Your LLC Today
Setting up an LLC doesn’t have to be difficult. The experienced Springfield business lawyers at Parks & Jones can help guide you through the process of setting up your new startup as an LLC. Give our offices a call today to get started.