When you create your business, one of the first things you need to do is decide what structure you will use. Each business structure has its own benefits and drawbacks. This includes LLCs, or Limited Liability Companies.
What are the benefits of an LLC? And what are the potential downsides? You must weigh both to understand which will serve you best.
Filing and taxation
Fit Small Business discusses the benefits and downsides to LLCs as a business structure. In terms of filing, LLC paperwork is unilateral, simple and straightforward. On the other hand, there are many maintenance and annual fees involved that can actually cost you hundreds of dollars a year.
For taxation, you have access to pass-through taxation. This is a form of tax that gets simplified and potentially lowered. However, there is no guarantee that your taxes will end up lowered. You could end up with other miscellaneous tax burdens as well.
The biggest benefit without a downside is the limited legal liability you have. An LLC allows you to separate your personal assets from your financial assets. That way, if your business goes bankrupt, it does not touch your personal funds.
It also gives you more credibility as a business, as filing for an official structure comes with stronger recognition and a sense of stability that customers tend to flock to.
On top of that, you have flexibility with ownership, membership and oversight. But you have inflexibility with membership turnover, which often comes along with rigid paperwork. If you would like to know more about the potential pros and cons of this option, consider discussing it with legal help.