Why Should You form an LLC?
1. You’re Protected: Owning an LLC means that you are protected from present and/or future liabilities against the business. In the past, businesses would have had to incorporate in order to gain this protection. Now, owning an LLC guarantees you this protection along with a host of other tax benefits.
2. Taxation on Your Own Terms: You have options! You choose how your business will be taxed. Choosing to be taxed as a sole proprietor means you are taxed on everything because your business isn’t viewed as a separate entity. You also have the option to be taxed as a corporation or even a partnership. There are other options too. For example, filing as an S-Corp makes your business a “pass through” tax entity. This means all profits, losses, credits and deductions go directly to you (the owner)’s personal tax returns. By doing this, you avoid being taxed double.
3. You Have “Wiggle Room”: Forming an LLC is much easier than forming something like a corporation because there are less regulations. Things like establishing a board of directors or required meetings are non-existent. Your business, as an entity, is open to make changes as you’d like.
4. There’s a Variety of Structures: If there are multiple owners or members, you can choose to incorporate within three different structures:
- Single Member LLC: only one owner (member) responsible for the company.
- Member Managed LLC: each member shares an equal amount of responsibilities.
- Manager Managed LLC: manager is selected to control the company.
5. It’s Cheaper: In the U.S., the average LLC formation cost is $500.00, this can vary depending on what state you are forming in. More information about your state’s requirements and costs can be found through your Secretary of State.
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