No matter how small a business is when it gets started, there is something to be said for making it official and gaining protection in case anything happens. Even for a small business, protection can be crucial, as one lawsuit can cause a significant amount of financial damage. One of the business types to consider is an LLC. What is an LLC? Should your business be one?
The Basics of an LLC
An LLC, or limited liability company, is a business structure that separates the business from the owner. This means that if something happens, the business can be sued, but the owner cannot. This protects the business owner’s personal assets like their home from lawsuits against the business. An LLC is not taxed on its own, though a tax return may need to be filed. Any income or losses will be filed by the business owner on their personal tax return.
Pros and Cons for LLC Status
An LLC provides business owners with protection and can be a flexible way to own the business. Management is flexible as well, and an LLC status can help the business owner establish credibility. Customers are more likely to do business with an LLC instead of just the business owner. Disadvantages include the cost to get started and maintain the status as well as the difficulty in transferring the business if the owner decides to sell.
Should a Business be an LLC?
Business owners should weigh the pros and cons themselves to determine if having the business be an LLC is a good idea for them. For most small business owners, the protection offered can outweigh the disadvantages of having an LLC, and it’s possible for business owners to get started easily. It’s important to learn more about what an LLC entails, such as how it is created and what the fees for formation are, before beginning, so business owners fully understand what the potential changes may be when the business becomes an LLC.
If you’re thinking about starting a small business or you already own one, no matter how small, becoming an LLC can be a good idea. It’s best to talk to a professional before making any decisions, because changing the business status can have an impact on taxes, how the business is run, and more. Learn more now to see if this is the right option for your business or if a different status may be better.