A business can be started without any paperwork to create a specific business type. However, this isn’t always the right way to get started. Many small business owners will want to consider creating an LLC from the beginning. Before doing that, however, it’s a good idea to learn about the pros and cons of creating an LLC.

Liability is Limited

One of the biggest positives of creating an LLC is that liability can be limited. The owner or owners of the company are not personally liable for anything the company does, so they don’t have to worry about losing their home, vehicle, or assets in case there is a lawsuit of any kind.

Easy to Get Started

It’s easy to set up an LLC, which is another positive. It takes filing a little bit of paperwork and paying some fees. Though the fees can vary by state, they are relatively inexpensive and can be worth it to have the liability protection that comes with setting up an LLC for a business. No lawyer is needed to set up an LLC, but it is a good idea to get help to make sure everything is done right.

Limits on Limited Liability

One of the disadvantages of an LLC is that the limited liability isn’t foolproof. If the business transactions and personal transactions aren’t separated, it may be possible to lose assets to creditors or in a lawsuit. Additionally, if fraud is committed by the business, it may be possible for personal assets to be taken to cover the victims’ losses.

Self-Employment Taxes Paid

Another disadvantage is how taxes are done. With an LLC, taxes are passed through to the owners, so self-employment taxes are paid on any income the owners receive from the business. This can make doing taxes more complicated, so it’s often necessary to work with an accountant to find and take the full amount of any tax deductions to reduce tax liabilities.

If you’re ready to launch a business, creating an LLC may be an excellent idea because of the number of benefits you could get. However, it is important to note that the different pros and cons of creating an LLC. This way, before creating an LLC, it’s possible to find out how to mitigate or prepare for any of the potential downsides. Learn more about creating an LLC today to find out if that’s the perfect option for your business.