What You Need to Know Before Forming an LLC

Are you thinking about adding the “LLC” (Limited Liability Company) suffix to your business? If so, you will quickly discover it comes with perceived power and prestige. The perception, however, is just one part of what incorporating your business really has to offer. The good news is, it’s easy to handle the paperwork for creating an LLC, but you will have to pay a fee of some sort. Every state charges a yearly filing fee of about $200. Are you ready to learn more about Limited Liability Company? If you are, then keep reading. This article can help you determine if it’s the right structure for your business.

LLCs Offer Credibility with Clients/Customers

Perception is subjective. However, there’s no question when you add an “LLC” to the end of your business name, it adds prestige. As a result, by creating an LLC with your business, you will seem larger and more established to your customers and clients. This can help to build loyalty, and even increase interest in the product or service you offer.

Personal Asset Protection

With any type of corporate entity, including the LLC, your personal assets are completely safe. For example, if you were going to create a partnership or sole proprietorship for your business, then you would be personally liable for any debt taken on by the business, and lawsuits that are filed against it. However, when you form an LLC, your business is completely separate from your personal assets. As a result, creditors are unable to try and take any personal assets you have to compensate for business debt. When you opt for an LLC, you as the owner have liability protection from the acts of your employees, too.

Attract More Investors with an LLC

Having investors interested in your business can help you grow significantly. However, if your business assets and your personal assets aren’t separate, then most investors aren’t going to be excited about providing you with capital. If you are ever planning to look for investors, then forming an LLC is a smart move.

The Tax Benefits Offered by an LLC

If you are a sole owner or take a partner for your business, then the losses and profits incurred by the business will be reported on your personal tax return. With a corporation, the profits your business earns are double taxed and then distributed to your shareholders as a dividend. After that, they are taxed once again, on a personal level. S corporations and LLCs are taxed just like the partnership.

Enjoy Uninterrupted Business

If you opt for an LLC business entity, then you avoid the legal entanglement that may occur after the owner makes the decision to retire, or if they die. An LLC is a binding, legal business structure that will endure both retirement of the owner, as well as death. This results in no interruption to the business operations – regardless of what may be going on.

File Where You Want to Do business

When you are ready to file the paperwork to create the LLC business entity, then you should make sure to file in your home state. This is not only easier, it is also more affordable. Why? Because, when you do this, you can avoid paying the franchise taxes, and keep from having to file an annual report in different states.

If you are considering filing as an LLC for your business, getting to know what it offers and if it is right for you is crucial. The tips and information here will help you determine if this is the right structure for your business, regardless of how long it has been around.


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