Five Convincing Reasons for Even the Smallest Businesses to Form an LLC

Five Convincing Reasons for Even the Smallest Businesses to Form an LLC

Five Convincing Reasons for Even the Smallest Businesses to Form an LLC

You started a business because you’re passionate about the products or services you offer. Or maybe you started your own business because you wanted to be your own boss. No matter what the reason for starting your own business, you probably didn’t decide to go into business for yourself because you couldn’t wait to deal with all the legal issues that come with owning your own company.

To avoid all the legal issues surrounding the operation of a business, you may have avoided forming a business entity. You may not think this is a big deal, especially if you’re a one-person operation.

No matter how small your business, it is extremely important for you to consider forming an LLC. Here are a few reasons that will convince you to give a legal advisor a call.

1. Elimination of Personal Liability

One of the most convincing reasons to start an LLC is to protect yourself from potential litigation. It’s true with any business, but it is especially true when it comes to property owners.

Anderson Advisors elaborates by saying, “When an incident does occur and someone wants to sue you, the first thing his lawyer will do is look up your name in public records. Once those properties show up in that search, you can kiss any hope of a quick settlement goodbye. The nightmare of a drawn out and costly lawsuit begins. You can easily avoid this happening to you by structuring your properties with real estate LLCs.”

Whether a tenant slips and falls and wants to sue or you unknowingly sold a faulty product, it’s important to separate your personal name from your business so you aren’t held personally liable for an accident or a mistake.

2. It’s a Good Way to Raise Funds

It isn’t cheap to start a business. Whether you need funds to get off the ground or you need a little more cash to expand your operation, most businesses will find themselves looking for investors. One of the best ways to gain their trust is to form an LLC.

Having a Limited Liability Company makes your business seem more legitimate than Uncle Bob’s basement business. In addition, investors are able to deduct the contributions they make to your business. They can also use their losses to offset income if your business goes under.

3. Avoid Double Taxation

No one likes being taxed, but it can be especially painful for businesses. Without a firm grasp of the way tax law works, you could find yourself in a double tax situation.

Double taxation occurs when a corporate entity is taxed, then the individuals are taxed again for the same income. This is a fact of life for some corporate entities, but it isn’t something you have to fear with an LLC. It acts as a kind of pass-through entity, ensuring taxes only occur once.

4. Personal Privacy and Safety

Having your name attached to a business is a big deal. It may be a big deal that you’d rather not have to worry about.

Forming an LLC is a common method among celebrities and public figures, but it’s also a great way to protect your personal privacy and safety. Business and property assets are listed under the name of the business, so anyone accessing public records will not be able to tell they are associated with you personally. This can help prevent personal litigation and it can protect your family if your business hits it big.

5. It Can Be Customized to Meet Your Needs

One of the best reasons to choose an LLC is the fact that you have so many options for customizing your particular Limited Liability Company to meet your needs. A few of your choices include:

  • Single-member LLCs that tax a sole proprietor
  • Multiple-member LLCs that are treated as a partnership
  • LLCs that are treated like a C Corporation for tax purposes
  • LLCs that are treated like an S Corporation for tax purposes

LLCs are especially good for small businesses because they can be adapted to nearly any situation. You can create an operating agreement that fits your needs without worrying about the infrastructure of shareholders, directors, and officers that are common with other business entities.

An LLC might make the most sense for your business, but deciding if that’s the case, or what kind of LLC is best for you, should include a conversation with a professional legal advisor who can provide you with sound advice.

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