Should your small business or start up file as a C-Corp, S-Corp or Limited Liability Company (LLC) or should you remain a sole proprietor? Maybe it doesn’t make sense to shell out the hundreds or thousands of dollars to file one of these entities for your small business – and maybe it does. In this blog I will focus on the benefits of filing as an LLC.
According to Nolo, “the main reason people form LLCs is to avoid personal liability for the debts of a business they own or are involved in. By forming an LLC, only the LLC is liable for the debts and liabilities incurred by the business—not the owners or managers. However, the limited liability provided by an LLC is not perfect and, in some cases, depends on what state your LLC is in. Before you get started on your business venture, you’ll want to consider the potential liability risks of your business and the protection you’ll get from an LLC. Specifically, you should think about the following liability risks you take on as an LLC owner: 1) personal liability for your LLC’s debts, 2) personal liability for actions by LLC co-owners or employees related to the business, 3) personal liability for your own actions related to the business, and 4) the LLC’s liability for other members’ personal debts.”. (Click here to read more from NOLO)
Facts about LLCs
- The easiest and least expensive of the three business entities you can choose from.
- It is a corporate entity, therefore you define members of the corporation and what percentage of the company each owns.
- The members of the entity are taxed, not the entity (company), this could have tax benefits for the owners and the company.
- An LLC does not allow for shareholders so if you have outside investors you must file a C-Corp or S-Corp
If you have questions about filing an LLC for your small business or whether an LLC, C-Corp or S-Corp is the best choice, contact a business attorney in your state.