Selecting the right business structure is a key first step toward achieving your business’s goals, and you should keep those goals in mind when considering your options. One common business structure that entrepreneurs consider is a limited liability company (LLC). What goals might an LLC help you achieve?
An LLC creates a stronger separation between your personal and business finances.
While some people choose a sole proprietorship or partnership because of its simplicity, there are benefits to establishing your business as a separate entity. One particularly important benefit is that creating an LLC limits your liability for the finances of your business. As a result, if your business goes through financial difficulties, this structure protects your personal finances from the impact of those debts in most cases.
An LLC allows you flexibility in your management responsibilities.
Do you intend to take an active role in the day-to-day operations of your business? Will you hire managers to address these daily needs while you keep your focus on high-level business details? Forming an LLC allows you to choose to take a member-managed approach or a manager-managed approach when creating formation documents, allowing you to select the method that best fits your business.
An LLC may provide you with additional tax reporting options.
Taxes are a key consideration for businesses. Generally, LLCs receive pass-through taxation in which the members of an LLC report the profits and losses of the company on their personal tax returns. However, some LLCs can choose to be taxed as an S corporation. This allows you to select the tax strategy that best fits your business and its financial goals.
Depending on your business’s operational and financial goals, an LLC may provide you with the foundation for achieving those goals and moving forward to further success.