When you are an entrepreneur, you are inspired by your dream – your dream to establish your own business and see it flourish. You face a lot of challenges as you work toward that goal and learn a lot along the way. At some point, you will have to decide what business structure you should establish for your business. Will you run it as a sole proprietorship, a limited partnership (LP) or a limited liability corporation (LLC)?
Chances are that if you are just starting up, you won’t be establishing a corporation just yet. Many entrepreneurs first begin their businesses as LLCs because they offer the following advantages:
1. Establishing an LLC is easy and not that expensive. It doesn’t take a lot of paperwork (like establishing a corporation), nor significant startup costs.
2. LLCs offer limited liability, meaning that your business is a separate entity from you and your personal assets. If your business fails, you won’t risk losing your personal assets as a result.
3. LLCs allow for flexibility. You can run an LLC on your own, or you could operate an LLC with multiple partners. You can choose to manage your LLC on your own or with your partners, or you can elect a management group to do that.
4. LLCs have pass-through taxation. Your business profits won’t be subject to corporation taxes. Instead, you will report your profits in your personal income taxes, avoiding double taxation.
5. Operating an LLC doesn’t require the extensive record keeping that you have to complete when running a corporation.
As you make decisions about formally launching your business, such as which structure to choose, you should consult an experienced business law attorney. An attorney can offer you advice on what structure would best work for your specific situation and help ensure you create a partnership agreement if you need it and strong employee and business contracts.
With the right help, you can ensure all the legal aspects of operating your business are handled and you can concentrate more on growing your business and seeing it succeed.