Being in charge of any kind of business regardless of the industry is always a difficult task. There are so many things that need to be done from reports to taxes, administrative paperwork, and even the everyday decision-making processes that are required to keep the operation running. Your work could be easier or even more difficult depending on the type of business entity. For example, a corporation is more difficult to start and operate while partnerships don’t have liability protection. An LLC is arguably the easiest business type to form as seen from the details below.
Relatively Less Paperwork and Formalities
Some business entities, for example, corporations, are legally required to maintain a load of paperwork stemming from different sources such as bylaws, business ledgers, and even minutes from shareholder and directors’ meetings. All these formalities can be a hassle and that doesn’t even include the incorporation process which can take as long as six months. When you form an LLC, more often than not the process is usually seamless and takes a very short time. Additionally, you’re not required to hold or keep any record of meetings as any meeting held is at the discretion of the members.
As per the laws governing the formation and operation of LLCs you’ll be happy to find that every LLC has the liberty to choose a management structure that suits the owners of the LLC plus their mode of operation. This isn’t usually the case with corporations as they must comply with strict regulations regarding management structure including an established board of directors that meets up regularly as well as a place for shareholders and other members holding different capacities. There is also no cap on the number of members that the LLC can have and the investors could be from anywhere in the world, not necessarily US citizens.
Personal Asset Protection
One of the best things about an LLC is that they give owners and members limited liability. This means that in the event of any financial trouble and the company is unable to settle its accounts payable, then personal assets belonging to the owners or anyone associated with the company cannot be used to cover these debts. The term LLC stands for Limited Liability Company which is the whole point of forming one. When you form an LLC, it is like creating an entire entity that is independent of its owners and can therefore be sued, auctioned, or even enter into contracts without affecting or being affected by the owners.
LLCs have the option to be taxed as a corporation or pass-through entity. This provides some level of flexibility that not too many businesses enjoy. The owners can therefore choose the option that suits them most. When taxed as a pass-through entity, the LLC itself is not responsible for any taxes. Instead, revenue is passed through to the members of the LLC, who then report that income on their tax returns.
Forming an LLC has plenty of benefits so if you’re looking to start a business and don’t know what entity would be ideal, the LLC option is well worth considering.