Top 5 Advantages of Organizing Your Business as an LLC

When you’re just starting your business, you need to decide which type of business entity you should be. Some of the most common business entities are the S-corp, C-corp, Sole Proprietorship, Partnership, and Limited Liability Company (LLC). (Click here to learn more about each of these business entities.) Of these five entities, LLCs are arguably the most popular because of their flexibility. Here are 5 advantages to organizing your business as an LLC.

  1. They offer limited liability protection.

Limited liability protection is a great incentive to form your new company as an LLC. By having this protection, you guarantee that all of your personal assets stay personal and are not tied to your business. This means that your personal assets are generally safe from any debts accrued by your business.

With some other business entities, your business is tied to your personal assets. This means that if your business goes bankrupt, you may be digging into your personal savings or credit line to pay your business debts. If your business has failed, paying money out of your own pocket can feel particularly painful.

  1. There is greater tax flexibility.

When you create your operating agreement with your partners, one of the issues you’ll address is how you’d like to pay your taxes. There are three options:

  • Single member LLC, where you would pay the business taxes through your personal federal tax return (like you would in a sole proprietorship);
  • Partners in an LLC, where the partners decide to pay the business taxes through their personal returns (like you would in a partnership); or
  • LLC filing as a Corporation, where normal corporate tax rules apply.

The IRS offers more insight about LLCs filing as a partnership or corporation on their website, IRS.org.

  1. There is less paperwork.

You’ll want to have an operating agreement, but that’s the extent of your mandatory paperwork surrounding your creation of your LLC. Otherwise, your LLC will be governed by state laws. This makes it much easier for you to stay legally compliant. Let us help.

  1. You can have unlimited shareholders.

Some other business entities have limitations on the number of shareholders you can have, but LLCs do not. With an LLC, you can determine how many shareholders you’d like to have.

  1. You don’t need to assign roles.

In some of the other business entities, you need to say who exactly fills which position. This can be a little tricky if you have several partners, and you all plan to take an active role in running the business. With an LLC, you don’t need to assign specified roles. This allows for a more relaxed business structure and can reduce tension among your partners early on.

We are Here to Help

If you’re thinking of creating a new business, it’s best to contact a qualified Florida business lawyer. We can help ensure that you’re choosing the correct business entity and that all the correct paperwork gets filed. Our experienced business lawyers are ready to answer your questions and help you begin your business. Contact Cove Law today!

Written by Andrew Cove

Cove Law has significant experience defending federal investigations and formal actions by the Federal Trade Commission, the Consumer Finance Protection Board and the U.S. Department of Justice, as well as similar matters on the state level by the respective state Attorney General’s Offices and other local agencies.