Starting a business is an exciting idea. However, before you can find success in your new business you will need to make many decisions regarding your new company.
One of the first decisions is selecting a business structure. There are many kinds of business structures but one of the most common structures is the Limited Liability Company, or LLC.
Like other structures, there are pros and cons to operating your company as an LLC. Here is the basic idea and a few of the benefits and negatives to an LLC so you can begin figuring out which type of structure will set your new business up for success.
What is an LLC?
An LLC, is a relatively simple way of structuring a business. It is effective in protecting assets. LLCs can be owned by one or more people, defined as a single-member or multi-member LLC. An LLC is separate from its owners and is its own entity.
A few of the benefits of forming an LLC are:
- Unlimited members
- Limited liability – you are protected from lawsuits against the LLC
- Pass-through taxation – taxation only happens once
- Reduced regulation and paperwork – simple to set up and simple to run
- Personal asset protection
A few of the negatives of forming an LLC are:
- You cannot pay yourself a wage if you are a member
- No “fringe benefit” treatment
Starting a business can be complicated, so it will help to carefully consider all your options in order to make the smartest decisions regarding your new company. LLCs are a popular business structure and many people use them.