Entrepreneurs must choose between several options when establishing their new business. Sole proprietorship names one individual responsible for benefits and liabilities of a business. B Corporations commit to positive environmental and social change. Limited Liability Corporations, or LLCs, offer combined benefits of the different types of ownership. Here are some other reasons why a business should be a Limited Liability Corporation.
Establishing an LLC
Business owners often choose an LLC because it provides personal protection. They also get to take advantage of the ease of establishing an LLC. There are no rigid articles of incorporation to be filed when forming an LLC. This type of business is not required to make public announcements or hold shareholder meetings. LLCs do not have to prepare annual reports or keep certain records for more than seven years. Limited Liability Corporations require much less paperwork to establish and maintain than other forms of business structures.
Unlike other business classifications, LLCs do not have a specific category designated by the Internal Revenue Service. S Corporations have a unique caveat wherein they receive benefits of a corporation while being taxed at a partnership level. Only LLCs, however, offer pass through taxation benefit. This feature allows all income and expenses to pass through the business, onto the owner(s), which alleviates corporate taxation.
One of the main attractions of an LLC is the personal protection offered to participants. In essence, LLCs provide distance between the owner(s) and the business entity. Corporations and other business establishments do not protect owners or even executive staff from litigation, investigation, or financial consequences. Limited Liability Corporations are especially attractive to entrepreneurs and partners who have substantial personal assets.
Ownership and Management
Unlike other forms of business ownership, such as corporations and partnerships, LLCs offer flexibility when it comes to owners and partners. Limited Liability Corporations are not bound by formal business structures that prevent changes in management or limit the number of owners. The structure of an LLC is fluid enough to allow all owners to participate in the decision making processes. Limited Liability Corporations provide options for continued growth in a mutually advantageous direction without forcing any owner or partner to remain on the team beyond their interest.