As an entrepreneur, the first thing you need when starting your new business venture is a strong foundation. You can go about this by choosing the best possible business formation for your endeavor.
But how do you know which one to pick? There are many business structures out there, after all. An LLC might be a good place to start, as it tends to hold many benefits for different types of business owners.
LLCs provide personal asset protection
Forbes looks at the LLC structure, which holds many potential benefits for aspiring business owners. First and foremost, it provides protection for your personal assets. LLC stands for limited liability company. It lives up to its name in that it limits your liability for financial loss or damages. For example, say you must file for bankruptcy for your business. Under law, your personal assets do not get involved in the bankruptcy filing. This can include personal savings accounts, housing, vehicles and more.
LLCs are less complex
Next, an LLC comes with far less paperwork and management than corporations. You do not need annual reports or a board of directors. You do not need shareholder meetings. You do not need to worry about the complex taxes that S-Corporations and C-Corporations often face, either.
There are fewer downsides, but they do still exist. For example, you pay self-employment taxes if you do not select S-Corporation tax treatment. You can also run into potential conflict among role-holders. In an LLC, roles do not get distinct definitions right off the bat like they do in corporations.
In the end, the choice is up to you and what you feel suits your management style and growth goals best.