Making the decision to start your own business is a big one. However, when it comes to the legal paperwork, it can get confusing. Deciding how to set up your small business as an entity may have your head racing with various terms like LLC and INC. Here are three reasons that you should stick to forming your business as an LLC over other entity options.
They Eliminate Legal Financial Liability
Starting a new business can be a big financial risk. However, that risk gets much higher when you end up putting your house or car on the line. With an LLC, you can alleviate yourself from any financial liability if your business goes south. For example, let’s say your business is slapped with a lawsuit. They can legally liquidize your business properties. However, they can’t touch your personal possessions when you have an LLC in place. This saves your personal assets from any sort of repossession or seizing due to business practices or finances.
It’s Simple To Do
When it comes to forming an LLC, it’s super simple to do. Most states simply require you to fill out an online form and submit an application payment. LLC formation services are available for those who are unfamiliar or want to seek professional assistance in setting up their own business. LLCs are great for all sectors of business, especially in real estate. You can set up an individual LLC for every property you buy if you want to.
It Avoids Double Taxation
If you’ve spoken with anyone that has a corporation or other like entity, double taxation is an annoying problem. This is essentially a term utilized to say that both the business and the owners pay taxes on the business income. With an LLC, there is no double taxation. Rather, an LLC is seen as a pass-through entity. This means that the losses or income that were incurred by the business are filed on the owners’ or members’ tax returns. If there are two different owning members of the LLC who both have 50 percent ownership in the company, then the income or loss for the year would be divided in half on their tax returns.
Forming an LLC is a great option for many different types of businesses out there. The above are just three of the main advantages of doing so. It’s always a good idea to check in with a professional before officially applying to ensure that an LLC is the right business entity option for you.