If you’ve been reading my blog for any amount of time at all, you’ll know that my son, Max LOVES Star Wars 🙂 So, my husband and I end up making analogies to Star Wars in a great deal of our day to day conversations.
I often get questions from entrepreneurs just starting out about why they should form an LLC. Forming a legal entity is a must because it means that you have the Force protecting your personal assets. Who wouldn’t want that? A legal entity acts as a super power shield of protection around the business and spares your personal access from the potential dark side’s impact.
Now, whether that entity should be an LLC or some other form is a question that does not have a one size fits all answer, and your particular situation may merit a deeper look into the various options.
Should My Business Be an LLC?
Many entrepreneurs have heard that they should operate their business as an LLC (limited liability company). But is that true for you? To be a Jedi in business, you must learn to use the Force by knowing your stuff. Three factors you should consider in choosing a type of business entity to shield your business from the dark side are liability protection, taxation, and convenience. For many businesses, an LLC is the best choice.
The LLC—A Flexible Option
Liability protection, taxation, convenience—on each of these three major factors, the LLC is an attractive entity for the small business.
The owners of an LLC are generally not personally liable for the business’s debts. If the business gets sued, or can’t pay its bills, then you as an owner don’t need to worry about having to pay out of your personal assets.
When it comes to federal taxes, LLCs have options. You can choose to have the business profits pass through and be taxed on your personal tax return (like a sole proprietorship or partnership), or you can even choose to be taxed as an S-corporation, which could save you big money on taxes each year.
The convenient thing about LLCs is that you can structure the ownership in almost any way you want. How much authority each owner has, what share of profits each owner gets, how to vote on major decisions—these issues and more can be decided by the owners. Also, the paperwork you file with your state to create and maintain an LLC is usually minimal.
Before you choose any type of business entity for your next business, make an appointment with us. A Family Business Lawyer can help you choose the right entity for your overall life and business reality. And ask about our full spectrum of legal services for businesses, including our LIFT Start-Up Session, which includes employment structuring, financial advice, and tax systems you need for your business.