The simplest way to own a business is to structure it as a sole proprietorship. No one else has any control over the company or responsibility for its operations in a sole proprietorship. Partnerships are also relatively simple in many cases and involve two or more people having direct responsibility for a company.
Many aspiring entrepreneurs opt for the fastest and easiest way to start a business, which means defaulting to a sole proprietorship or simple partnership simply to avoid startup paperwork. However, for many entrepreneurs, investing the time and consideration necessary to form a limited liability company (LLC) may be a worthwhile endeavor.
Why is an LLC beneficial?
The reason that so many entrepreneurs select an LLC for their business type is that it is both simple and protective. People can operate an LLC in a manner very similar to how they would run a sole proprietorship without sharing their ownership interest or control with anyone else. However, the owner has protection from liability related to the business’s failures or its debts. Should the company fail or face legal challenges, the owner usually has an extra layer of protection from criminal or civil liability. They also have increased privacy, as people won’t be able to instantly connect them with the company.
Additionally, an LLC offers tax benefits. There is first an accounting of the organization’s finances, and any profits can pass through to the owner. The owner can apply individual exemptions to the income that they earned through the LLC. An LLC, therefore, offers financial and legal protection for those running successful companies and also can help protect those whose ideas end up failing.
Starting an LLC doesn’t have to be a chore
The idea of researching company names, putting together a business plan and filing paperwork for the LLC may seem intimidating and stressful. Still, the benefits of doing so far outweigh the expenses and risks involved in the process.
Many entrepreneurs seek legal guidance while forming a new business entity to ensure that they don’t make any mistakes and that they properly protect themselves from the risks involved in the process. Choosing the right business entity during the company formation process will be of the utmost importance for the organization’s success and an entrepreneur’s long-term protection.