The Pros and Cons of an LLC for your Business

When you are just starting out, one of the first things you’ll need to do is choose a corporate structure for your business. One option is a limited liability company, or LLC. This type of structure lies somewhere between a corporation and a partnership, combining advantages of both. In order to determine whether this is the right choice for you, you should carefully examine the pros and the cons.

The Pros

There are several advantages to choosing an LLC corporate structure, perhaps the most important being that if anything happens to the company, the members are not personally responsible. You won’t be risking any of your personal assets, so your bank accounts, cars and your home are all safe.

It can also be easier to start an LLC company compared to those of other structures. Fees will vary depending on the state where you are starting your business, though the paperwork and process is relatively simple.

Another advantage is that, when you use an LLC structure, your profits won’t be taxed on the company level. The members of the company will instead include profits on their own personal tax returns which can make the process of filing taxes easier.

Management for this type of corporate structure is also more flexible than others. You can hire outside managers, or you can choose to have the business managed by members, whichever option works best for your business.

The Cons

As with most things, there are some drawbacks to starting a business as an LLC. If, for any reason, a member leaves the company, the LLC cannot continue. The other members must dissolve the business and are financially and legally responsible for this. If you wish to continue business with the remaining members, you will be required to form a new LLC.

While filing taxes with an LLC can be simpler, being taxed as a partnership means that you are considered self-employed. Because of this, members must pay the self-employment tax that includes Medicare and Social Security taxes.

Another con of the LLC structure is that the limited liability that protects your personal assets can be overturned. In cases of fraud, or if you have not clearly separated your personal and business finances, a judge can determine that your personal property is not protected.

Ultimately, the corporate structure that you choose should be the one that works best for your company. Be sure to do your research and compare your options before making a decision.

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