When starting a business, an entrepreneur can choose any among the several business structures. Some of the business forms include sole proprietorships, partnership, limited liability companies (LLCs), and others. However, each has its pros and cons. LLCs have some advantages over the other form of business, like the protection of personal assets.
It would be best as a small business owners to choose to create an LLC because it has immense benefits. And while you are forming the company, you can avoid so much hassle by seeking recommended llc services to setup your business. It will also save you many costs and time.
Below are some of the advantages of limited liability companies compared to other business structures:
Enjoy Pass-Through Taxation
Generally, LLCs are pass-through entities. That means that their profits go directly to members (owners), and the government does not tax it at the company level. However, the gains are taxed on the income federal tax returns of members. That way, tax filing is more straightforward than if taxation was on the corporate level. What’s more, when the business makes losses, the owners can take charge of the hit on their returns and pay lesser amounts of taxes.
Flexibility in Business Management
Members are at liberty to run the business themselves or appoint a management group to do it on their behalf. That way, members with specialization in specific fields can have more input in the company and safeguard their interests as owners better. On the other hand, corporations are not managed by shareholders but by the board of directors elected by the shareholders. The board oversees the implementation of policies, and then there are officers to operate the business on a day to day basis.
Members Have Limited Liability
LLCs’ most significant benefit is that the members have limited liability, meaning they do not take personal responsibility for business actions. The owner’s assets are not to be taken over by creditors seeking to collect from the company. The members enjoy this protection as long as they operate the business up-and-up separating business and personal finances.
Flexibility in Ownership
LLCs enjoy a lot of flexibility with regard to membership. The members can be individuals, corporations, trusts, or partnerships. Moreover, there is no limit to the number of members. Conversely, S corporation which are corporations that have chosen taxation as pass-through entities. These corporations have restrictions on the number of members and even who can be members.