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LLC 101: Why This Business Structure May Work For You

LLC 101: Why This Business Structure May Work For You

More than 35% of small businesses in the US are categorized as a Limited Liability Company (LLC), according to the National Small Business Association. So when you’re aiming to turn your business into a popular brand, it’s important to consider what sort of business structure is a good fit. To that end, why would an LLC be a possible good fit for you.

Limited Personal Liability

One of the best things about an LLC is that it limits the personal liability of owners. Any business debts, liens, and lawsuits shall be limited to the assets held by the business itself and not the owner, according to Kevin Mercadante of Money Under 30. What this means is that your personal assets like your home, vehicles, and whatnot cannot be used to collect on business debts. Getting insurance for LLCs is also a good idea to help protect the owner or owners regarding workers’ compensation and certain liabilities related to heading a company. So going with an LLC as a business structure gives ample protection against personal liability.

Management Flexibility

Another strength of having an LLC is the flexibility that it offers in terms of management, according to Simone Johnson of Business News Daily. An LLC has the option of being member-managed wherein the daily operations are directly handled by the owners. It can also be manager-managed wherein the owners can bring in a third-party to handle the day-to-day business management. An LLC can give you the freedom of adding as many owners as you wish—you’ll simply have to determine how profits are sufficiently divided according to your operating agreement. The flexibility it gives in terms of structure gives you more choices about the way you run your business.

Tax Advantages

Depending on the state where you choose to operate, the requirements may differ. What remains the same, however, are the tax advantages you can experience. The IRS do not have a particular category for this business structure. So an LLC’s income and expenses can be filed through the owner’s personal tax returns and simply pay personal income tax on any of the profits they take on. This is what is referred to as the “pass-through taxation.”

An LLC business structure comes with other benefits that a savvy entrepreneur can take advantage of. Naturally, it is important to fully weigh the pros and cons that come with choosing what business structure goes best for your brand. That way, you can move forward with confidence and reap the perks of your business decision.