Having a business resembles what it’s like having a baby—it requires a lot of nurturing, care, and planning, especially in the beginning. As your baby, or business, grows and flourishes into its own, there are new measures you must take to ensure its health, safety, and continued development. Forming a limited liability company (LLC) is a fantastic option for business owners to give their company more credibility and an added layer of safety. Continue reading to learn all about the services an LLC can offer your business today.
What’s an LLC?
If you are the sole proprietor of a company, then that means you are fully responsible for the success or failure of your business. If someone sues your company, the courts can come after your personal assets, such as your bank accounts, house, cars, and more. An LLC protects you and your personal assets so that creditors and the courts cannot hold you personally responsible for losses or lawsuits.
Who should form an LLC?
Small business owners who want to take their company to the next level while also protecting themselves from debts or lawsuits incurred from running a business should consider forming an LLC.
Anyone can complete the steps without the help of a third party. On the other hand, hiring a team to take care of it for you will allow you more time to focus on your new business venture. In line with the review on Swyft’s offering, a firm can handle all your needs of incorporation. Concentrating your attention on developing your business idea rather than the paperwork minutiae of forming an LLC will help you nurture your company more efficiently in the early stages when it needs it the most.
What can an LLC offer my business?
The pros of an LLC far outweigh the cons. Read below about how an LLC can service your business.
Operating under an LLC will indicate to customers that it’s a real, trustworthy company. By having “LLC” in your name, you’re telling potential clients that you have gone through all the legal channels to make your company stable and legitimate.
Protection of Assets
A limited liability company will allow you to segregate your business assets into individual LLCs—this means creditors or people trying to sue you cannot come after any of your business assets. Under an LLC, your business assets will be shielded from personal creditors, and your personal assets will be guarded against business creditors. So you can expand your business without the fear of risking everything you possess if the business isn’t successful.
Bear in mind, that if someone sues your LLC, then all of its contents can be liquidated, seized, or placed on a freeze to where you wouldn’t be able to access your capital—no funds can be sent or received by the LLC under a freeze.
An LLC is the most flexible option for a business structure. It can be designed to fit a simple partnership between a couple of professionals, or tailored to hundreds of silent investors. There is much more freedom of choice in an LLC, which is why it’s the most popular option for small business owners.
LLCs will not be double-taxed like corporations are, where their federal income and shareholders’ income are taxed. LLCs actually do not pay taxes at all at the business entity level.
Additionally, any losses will be passed through to the owner’s taxes as deductions, and profits will be taxed on the owner’s personal tax reports. This means that investors may not get their money back if the company isn’t successful, however, they will get whatever they put into the company deducted from their taxes.
Why doesn’t every small business owner get an LLC?
It’s true—many small businesses opt for sole proprietorship over an LLC. Why is that? Well, the paperwork, license, and search for investors process aren’t for the faint of heart. The primary reasons are listed below.
Transfer of Ownership
When you have a couple or several members in an LLC, it can be a challenge to add new members or to transfer or change the ownership percentages between members. This is one aspect that is easier in corporations.
General partnerships or proprietorships are less expensive than an LLC. An LLC will cost you in annual and franchise tax fees and will vary by state.
If you’re set on expanding your small business, then it’s time to make the move to an LLC to protect yourself legally and financially and to develop the credentials of your company. Remember to always turn to a licensed lawyer for advice to ensure your new business venture is in accordance with state laws and regulations.