Serving business owners since 2007There comes a point when everyone running a business, whether a one-person professional consulting service or an Internet-based store, asks the question, “is an LLC right for my business?”
First, you’ll want to take a look at the size of your business and assets. To get started, answer these yes/no questions:
- Are you a Mom & Pop operation with no employees?
- Do you operate out of your home?
- Is your income relatively low?
- Are your personal assets of relatively low value?
If you answered NO to even one of the above, you should definitely consider forming an LLC for your business.
Form an LLC to protect your personal assets
Almost always, limiting liability is reason enough for business owners with even modest personal assets, such as a house and a car, to form a Limited Liability Company (LLC) for their business. Without limited liability protection, an owner’s personal assets can be taken to satisfy unfulfilled obligations of the business. Unpaid loans and bills, unfulfilled contracts and guarantees, broken leases, and even judgments stemming from legal action against the business are just some of the obligations for which a business owner could be held liable.
It is certainly prudent to eliminate the risk of losing your personal assets to satisfy a business obligation if at all possible.
Forming a corporation is also an option
Of course, an S corporation will also provide you with limited liability protection and may prove to best suit your needs after you have considered all of the other issues, not the least of which is taxes.
The type and size of the business, the state or states of operation, the number of owners and their relationship to the business and each other, the personal finances of each of the owners and their families, plus other questions related to the specific situation must be taken into account in order to identify which of the possible business entities will be most beneficial.
You’ll find a wealth of information on the different types of business entities, from C and S corporations to LLCs and their relative advantages in the MaxFilings Online Incorporation Knowledge Center.
Conclusion: So, should I form an LLC?
As you can see, the answer is “it depends”. Examining all of the unique variables of your situation alongside the latest federal, state and municipality tax laws is an exercise that calls for the help of a qualified accountant, tax advisor or financial planner. Not only are tax laws ever changing and complex, they are subject to interpretation and the average layman will be quickly lost.
If you have decided it’s time to form your Limited Liability Company (LLC) or corporation, MaxFilings can help you do so quickly, easily, and economically. start entering your information now and save it for when you’re ready. You’re under no obligation, and there is no charge until you actually place your order.
Following are some articles that may help in deciding between an LLC, a C corporation and an S corporation.
Can S Corporation status reduce self-employment taxes?
Is pass-through tax treatment the same for LLC’s & S Corporations?
