Businesses can be risky. If you are in a sole proprietorship or partnership, you are legally the same as your business. In other words, your debts and personal assets are at stake. If a business partner or employee does something illegal, you may be held personally liable.
This is where a Limited Liability Company (LLC) comes into play. An LLC is legally separate from its owners and limits the personal liability for them if something negative was to happen. In this case, if someone was to collect debts, they couldn’t collect on your assets like your house or your bank account. If your business gets sued, your personal assets are protected.
Unlike Corporations, LLCs are also held to less stringent requirements. They don’t have to hold annual shareholder meetings and aren’t required to keep extensive records.
Another major factor that may lead you to consider an LLC is the tax advantage. LLCs don’t have to pay any corporate taxes or LLC taxes and have the option of passing through to an owner’s personal tax returns. The owner simply pays personal income tax on their profits. Normal corporations are taxed twice; once at a corporate level and once at an individual level. In this way, an LLC. gets the advantage…
