What You Must Know About LLCs as a Small Business Owner

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While setting up a business, you’re faced with the prime question of deciding your company structure. One of the most popular structures is a limited liability company (LLC). learn more about LLC services here

This structure is recommended by many due to its features, which are from partnerships and corporations. Click here if you looking to apply for ein

But hold on…

Before you choose to establish an LLC, let’s have a look at their advantages and disadvantages.

Pros of LLCs

Here are the pros of establishing an LLC.

1. Easy to Form

LLCs are relatively easy to form. The process for forming LLCs involves filing your LLC Articles of Organization with the state and paying the fees to get started. 

2. Limited Liability

LLCs borrow the limited liability feature from corporations. The LLC is seen as a separate entity, and for that reason, the members aren’t held liable for the debts of the company.

3. Great Flexibility

Unlike Partnerships, you have a great amount of flexibility when it comes to profit distribution. You don’t have to stick to the 50-50 model and can decide on custom distribution models.

What’s more?

You don’t need to maintain any formal minutes of meetings or resolutions too.

4. Better Taxation

With an LLC, you can avoid double taxation as the income “flows through” to the members. However, in  LLCs with multiple members, you would have to pay a self-employment tax. If you choose to be taxed as an S-Corp, however, you can avoid it.

Cons of LLCs

Here are the cons of LLCs as well, including:

1. Difficulty Going Public

If you want to go public or distribute employee shares, then an LLC isn’t the best company structure. Instead, you should establish a corporation. 

The same applies to getting investors for your company too.

2. More Fees

Unlike sole proprietorships or partnerships, you have to do state-level and federal-level filings with an LLC. For this, you need to pay state-level filing fees each year too.

It’s also simpler to form sole proprietorships and partnerships.

Want to learn more about how to form an LLC? Check out this infographic created by GovDocFiling.