Should I set up a limited liability company?

Should I set up a limited liability company?

| Oct 6, 2020 | Business Law

One of the most significant decisions to make when starting a new business is how to register it. It may seem like an unimportant decision when you are young and starting your first business. Yet, with time, you will come to realize the importance of the choice you made. If you chose well, you can reap significant benefits. If you chose poorly, you may be left cursing your decision.

Here are some of the advantages of choosing a limited liability company (LLC):

  • It protects you: As the name suggests, an LLC limits your liability should something go wrong, and you end up being sued or owing money. It separates the business from your personal life. Failing to do this could mean you lose your home and other possessions if you lose a lawsuit.
  • Pass-through taxation: LLCs do not pay tax themselves; rather, the members pay tax on the profits and losses in their tax returns. Unless you specifically request that the IRS treats your company as a corporation for tax purposes, they will treat it as a partnership or sole proprietorship.
  • It sounds more business-like: Sometimes, image is everything. People may take an LLC more seriously than a sole proprietorship. You could gain clients who would otherwise ignore you.
  • Ease of setting up and running: LLCs are far easier to maintain than a corporation, and there are fewer legal costs involved.

When venturing into the business world, you might believe that if you need to hire a business attorney, it means something has gone wrong. However, by hiring one initially, you can ensure that your company is correctly set up, reducing the chance you need a lawyer to defend your company in the future.