If your lifelong dream has been to create a business, chances are you’re trying to decide what business model best fits your idea and vision. If you’re searching for the least involved and easily adaptable model, consider a Limited Liability Company, or LLC. It’s easy to understand, the least complicated of all models, and offers many perks and options that other business models might not have. In this blog, we’ll discuss the definition of an LLC, the pros and cons, how to obtain an LLC, and the best businesses that are suited to an LLC. If you’re searching for a reputable LLC business lawyer who will provide amazing legal advice, contact The Law Office of Brian Loomis today.
What is an LLC?
As mentioned before, a Limited Liability Company means that the owners aren’t personably responsible for any of the business’ debts or lawsuits. If the LLC happens to go bankrupt, then the owners or founders aren’t responsible to pay out of pocket to resolve debts. Also, the owners won’t face the possibility of losing their home if they suddenly find their business in legal trouble. The IRS recognizes LLC taxes as a sole proprietorship or partnership and owners aren’t required to pay income taxes. Instead, they only have to list business profits and losses on their personal taxes returns that they file every year. On the other hand, an LLC can also choose to tax itself as a corporation and must follow corporate law tax and filing requirements.
To form an LLC, the owners must file the required formal documents of their state, pay the fees, and complete and comply with all other regulations before starting the business. Starting an LLC also cuts out many other time-intensive requirements that other forms of business must observe. LLCs don’t have to pay the same amount of fees or complete the paperwork that is required of corporations. They also don’t have to issue stock, hold yearly meetings, or record meeting times.
Advantages of an LLC
Creating an LLC is an excellent idea for most people who want to start a business without a lot of pressure. One of the biggest advantages that appeals to many is that an LLC offers pass-through taxes. In essence, the owner or owners don’t have to file separate business taxes for the LLC. As mentioned above, they only have to report profits and losses on their personal tax return and can avoid the stress and headache of double taxation.
Along with pass-through taxes, individuals who want to create an LLC aren’t required to be a U.S. citizen or a permanent resident. This is appealing to many immigrants and business owners who are interested in starting their own business but might not possess American citizenship.
LLCs also have the benefit of enhanced credibility for lenders, investors, partners, and suppliers. While being a sole business owner might be a dream for some, creating an LLC with another trusted individual will reflect better on your business and can help the growth of the LLC improve more quickly.
LLCs offer legal protection. In case the business fails, the partners or owner isn’t required to assume responsibility for debts or obligations. This keep the owners safe and also free from the added pressure of ensuring that the LLC is successful.
Disadvantages of an LLC
As with anything in life, there are a few disadvantages of an LLC that can cause issues with business growth. Since an LLC has somewhat limited growth, investors and potential partners won’t be interested in a business that doesn’t have stock options. This could hurt the LLC as it grows and changes because there always is a ceiling to its profits and potential.
LLCs are treated differently in different states, so if you happen to move your business, the rules will be completely different and you may have extra taxes imposed on you that your business previously didn’t experience. You also may have to change your business model and make other adjustments to comply with the LLC laws in the new state.
Self-employment taxes might also be required of your LLC, depending on the state. Of course, you’ll have to check with the regulations, but that’s also an important factor to the creation of your LLC because it can be an added expense as self-employment taxes are often higher.
For some business-minded people, starting a business is a dream. An LLC is a perfect place to start because it offers incredible experience without too much risk. If you feel that you’re ready to form an LLC, the best place to start is with your Secretary of State’s office. For all of your business related legal questions and concerns, contact Brian Loomis. With years of offering his experience and expertise in Springfield, Missouri and surrounding areas, Brian is here for you and all of your business needs. Call The Law Office of Brian Loomis Law today!